ASIC has formed an alliance with the Irish securities regulator, the Central Bank of Ireland, to lead a global review into misconduct that stems from modern-day and emerging issues such as the gamification of investment access vehicles, the rise of retail trading apps and “gambling type 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 addressing evolving retail investor trends and their implications.
Of chief concern for the regulators are the effects of a recent “surge” in retail trading, particularly by new investors.
“The ease with which retail investors can access markets and products can create an environment where consumers are less informed, but more exposed,” the consultation paper noted. “In addition to investing in risky and volatile markets, a majority of retail investors are investing without regulated advice, thus leading to more high-risk investments.”
The spread of self-directed investing is something predatory providers and scammers are increasingly manipulating, the regulators believe.
“This together with the trends for digital brokerages and platforms to promote gaming type environments and processes that can benefit from behavioral trends of retail investors is identified by IOSCO members as a significant risk.”
The current market environment may have created a “fertile ground” for fraudulent, unauthorised or otherwise non-compliant activity, the taskforce states.
The consultation comes on the back of ASIC delivering its sternest warning yet to finfluencers and unlicensed ‘money coaches’ who skirt the regulatory line of advice provision, with the regulator’s head of markets Greg Yanco saying that just influencing consumers could land people in prison.
“Starting to receive money for the information [or] the advice you’re providing is a clue that you might need to start getting a licence,” Yanco said. “If it’s influencing people you’re going to need a licence even if you’re not being paid.”
According to ASIC commissioner and taskforce co-chair Sean Hughes, harmful behaviour such as mis-selling, mis-labelling and misleading disclosure is a “worldwide phenomenon”.
“The Retail Market Conduct Task Force has provided a timely opportunity to compare our experiences with other regulators and understand what innovative tools are being implemented successfully,” Hughes said.
“Australia’s experience indicates that a flexible and creative use of regulatory tools is important in acting quickly to disrupt misconduct,” he continued. “We encourage a broad range of stakeholders – including retail investors, financial consumers and market participants – to engage with the IOSCO consultation.
