ASIC and Ireland conduct study on global retail financial services market
ASIC has formed an alliance with Ireland’s securities regulator, the Central Bank of Ireland, to conduct a global misconduct review stemming from modern and emerging issues such as the gamification of investment access vehicles, the rise in power of retail trading applications and “gambling-style investment opportunities”.
Acting as leaders of the Retail Market Conduct Task Force, which sits within the International Organization of Securities Commissions (IOSCO), ASIC and the Irish yesterday released a consultation paper on the changing retail investor trends and their implications.
The main concerns for regulators are the effects of a recent retail ‘push’, particularly by new investors.
“The ease with which retail investors can access markets and products can create an environment in which consumers are less informed, but more exposed,” the consultation paper notes. “In addition to investing in risky and volatile markets, the majority of retail investors invest without regulated advice, leading to riskier investments.”
The spread of self-directed investing is something that predatory providers and scammers are increasingly manipulating, regulators say.
“This, combined with trends for brokers and digital platforms to promote gaming-like environments and processes that can benefit from behavioral tendencies among retail investors, is identified by IOSCO members as a material risk.”
The current market environment may have created “breeding ground” for fraudulent, unauthorized or otherwise non-compliant activity, the task force says.
The consultation comes after ASIC issued its sternest warning yet to unlicensed influencers and ‘money coaches’ who circumvent the regulatory line of providing advice, with the regulator’s head of markets Greg Yanco saying that simply influencing consumers could land people in jail.
“Start receiving money for information [or] the advice you give is a clue you might need to start getting a license,” Yanco said. “If it’s influencing people, you’ll need a license even if you don’t get paid.”
According to ASIC Commissioner and Task Force Co-Chair Sean Hughes, harmful behavior such as mis-selling, mislabeling and misleading disclosure is a “global phenomenon”.
“The Retail Market Conduct Task Force provided a timely opportunity to benchmark our experiences with other regulators and understand what innovative tools are being successfully implemented,” Hughes said.
“Australia’s experience indicates that flexible and creative use of regulatory tools is important to act quickly to disrupt misconduct,” he continued. “We encourage a wide range of stakeholders – including retail investors, financial consumers and market participants – to participate in the IOSCO consultation.