Global: IOSCO Launches Roadmap to Bolster Retail Investor Online Safety

On 19 November 2024, the International Organization of Securities Commissions (IOSCO) unveiled a comprehensive roadmap aimed at strengthening online safety for retail investors. This initiative seeks to address emerging challenges in digital financial ecosystems and enhance investor protection.

Three Key Consultation Reports

The first phase of the roadmap includes three consultation reports focusing on pivotal areas in the digital investment landscape:

1. Finfluencers

This report examines the growing influence of financial influencers (finfluencers) on retail investors and the potential risks and opportunities they present. Key highlights include:

• The lack of familiarity among many finfluencers with traditional financial regulatory frameworks, often operating outside regulatory oversight.
• Identified gaps in regulatory coverage, particularly for unregistered individuals providing financial advice or guidance.
• A proposed set of Good Practices for regulators, market intermediaries, and finfluencers, designed to promote transparency, accountability, and alignment with securities regulations and investor protection standards.

2. Digital Engagement Practices (DEPs)

This report addresses how market intermediaries use digital engagement practices to interact with retail investors. It explores:

• Regulatory approaches to DEPs across jurisdictions.
• Potential gaps in current regulations due to the absence of global standards for managing challenges posed by these practices.
  The report builds on existing IOSCO work and international guidance, aiming to identify and mitigate risks associated with digital engagement in financial services.

3. Online Imitative Trading Practices

This report focuses on imitative trading strategies, such as copy trading, which allows retail investors to replicate the trades of “experienced” or “professional” traders. Key insights include:

• The automation of trade execution, often conducted without manual intervention or full awareness of the copy trader.
• Proposed Good Practices to help regulators assess and update their regulatory frameworks to mitigate risks associated with imitative trading. These practices aim to strengthen oversight and protect retail investors in line with jurisdictional laws and mandates.

Next Steps

IOSCO has invited public feedback on the consultation reports, with the deadline for comments set for 20 January 2025. This collaborative approach aims to ensure the proposed measures are robust and effectively address the complexities of online retail investing.