Retail investing changed with the onset of the pandemic, and many of those changes are expected to endure. According to a new report from the international Organization of Securities Commissions (IOSCO), those changes mean increased investor protection and investor education challenges for regulators.
The umbrella group of global regulators issued a report examining changes in investor behaviour that are being observed around the world, and detailing practices for regulators to consider to enhance investor protection and education.
According to the report, a number of investor protection concerns were exacerbated by the pandemic, which produced an increase in self-directed investing, enhanced risk-taking by investors, greater reliance on social media for investing information, and an increase in frauds and scams.
While forces such as widespread public health restrictions and generous fiscal supports that facilitated some of these trends may have faded, the report said that some changes are expected to endure.
For instance, it noted that “it is easier to participate in the financial market today than ever before and retail investors continue trading riskier investments, while regulators report a higher volume of investor claims and complaints.”
Against this backdrop, the report sets out “sound practices” for regulators to follow when designing investor education initiatives and interventions to mitigate retail investor risks and vulnerabilities during times of crisis.
“The Covid-19 pandemic has reminded us that investor education pays off. Investor education initiatives need to continue adapting to market developments, changing investors’ needs and characteristics, and evolving risks that challenge investor protection,” said Pasquale Munafò, chairman of the IOSCO Committee on Retail Investors, in a statement.
“In a context in which retail participation in the capital markets is easier than before, investor education should explore and find new and proper ways to reach out to current and new investors and help them develop knowledge and sound behaviours under normal and crisis situations,” he added.