The group of global securities regulators has issued a report detailing the sorts of efforts that regulators around the world make towards improving investor education.
The International Organization of Securities Commissions (IOSCO) Monday published a report that aims to provide an overview of the different approaches that supervisory authorities and self-regulatory organizations take to educate retail investors on issues relevant to financial products that are distributed by intermediaries. The report details a wide range of approaches, though they also indicate certain common strategies and challenges that regulators face in determining the most effective educational measures.
The report notes that several jurisdictions consider investor education as an essential part of achieving investor protection. Some of these jurisdictions have established independent investor education bodies; others have units or departments within the supervisory authority that are charged with investor education, it says. However, some regulators limit their own investor education initiatives largely to the issuance of investor alerts.
Most authorities have not introduced formal evaluation processes to examine the results of their measures, the report says. “Generally, finding the appropriate measurement tools has proved difficult,” it says. “However, one authority is currently developing a financial literacy index to assess the impact of financial education initiatives.”
Additionally, it reports that many supervisory authorities provide information for investors on their websites about investment services and specific financial instruments. Some complement online information about specific complex instruments with case studies that illustrate, based on specific examples, how investors might lose their investments to translate theoretical risks into realistic scenarios.
Some authorities make use of online tests and quizzes for investors on subjects such as scam potential or on general information about investments and securities. “Such tests are found to be popular with investors as they offer a more informal approach to financial matters,” it notes.
A widely followed approach to investor education is to divide the population into target groups, each with a different risk profile and varying levels of financial knowledge, the report says. For example, initiatives focusing on students, retirees, or middle-income groups have often been used, it says. “This approach helps to target investor education measures and make them more effective,” it notes.
Along with conventional tools, such as written information, conferences and websites, some authorities employ more innovative tools such as TV campaigns or social marketing, it says. “One authority uses a known celebrity to host these shows, giving these measures enormous publicity,” it reports.
The financial industry, and others, also carry out investor education initiatives in most jurisdictions, it says. These efforts are generally not governed by statutory guidelines, but are performed on a voluntary basis.