In the new guidelines, IOSCO said the use of gamification techniques and influencers that impact the trading behavior of retail investors poses risks, as do other digital innovations, including offers complex cryptography that “give rise to new regulatory and investor protection challenges, spanning the entire distribution chain”. .”
As these changes go beyond regulatory frameworks, “there is a risk that retail investors may be exposed to harmful or even fraudulent online activity,” the report warns.
“Apparent risks are associated with the increased complexity of financial products and services, the rapid pace of innovation, ongoing gamification trends, and increasing levels and volumes of self-directed transactions among retail investors, [which] may not have been accompanied by a commensurate increase in financial consumer education,” the report states. Tracking these trends poses a “great challenge” for regulators, he said.
IOSCO said its recommendations aim to strengthen protection for retail investors in light of these emerging threats by providing a “toolkit” of policy measures that regulators around the world can use to address these risks, as well as a set of enforcement techniques that take advantage of technology-enabled surveys. tactics and powers to help enforce these rules.
The policy measures set out in the report address rules for online marketing, distribution and online integration of businesses, including supervisory and proficiency requirements for these areas; cross-border compliance; and legal clarity for the use of the Internet domain by companies.
The enforcement tools detailed in the report cover proactive technology-based detection and investigation techniques, as well as the powers regulators need to take action against illegal activity and misconduct online. It also calls for enhanced collaboration with foreign and domestic lawmakers and technology service providers (such as web hosting services).
IOSCO said the report was part of its efforts to build “confidence” in markets amid new and emerging opportunities and risks, which requires “increased regulatory attention to marketing and digital offerings” and more effective global collaboration to ensure investor protection.
“A digital revolution is sweeping the world of finance,” Martin Moloney, secretary general of IOSCO, said in a statement.
“This revolution allows companies to refine the techniques they use in their digital marketing,” he said. “While this innovation promises to provide investors with well-targeted information, it also creates new risks for investors through systemic targeting and unsolicited offers, sometimes underpinned by gamification and “influencer” activity that is not not always helpful to investors. Digital fraudsters can hide behind a “digital veil” that makes it difficult for regulators to locate, identify and take action against them. »
Moloney said IOSCO’s policy and enforcement guidelines are designed to “address the complex challenges of driving in today’s digital world and to achieve better outcomes for financial consumers.”