21 March 2022

IOSCO consults on recent retail investor trends and related conduct implications

Increased retail participation in securities markets could mean retail investors increasingly influencemarket trends and pricing, with corresponding regulatory implications for retail market conduct.

The Board of the International Organization of Securities Commissions (IOSCO) is seeking feedback
from stakeholders on issues related to the development of a regulatory toolkit for jurisdictions to consider when addressing emerging retail market conduct issues in today ́s rapidly changing retail investment landscape.

Ashley Alder, Hong Kong SFC CEO and Chair of the IOSCO Board, said: “Innovative technologies and
social media are transforming important aspects of retail investing, giving rise to retail investor trends
such as gamification and self-directed trading. IOSCO ́s Report on retail market conduct serves as a
guide to help regulators around the world develop their approach to address these evolving trends and
related conduct challenges.”

Increased retail participation in securities markets could mean retail investors increasingly influence
market trends and pricing, with corresponding regulatory implications for retail market conduct. Increased retail participation carries with it the threat of misconduct. Misconduct in capital markets has far reaching consequence s for financial consumers, investors, national economies and the overall global financial system.

The Consultation Report provides a clear picture of the evolving global retail investor trends and their
implications for market conduct. Among other issues, it examines the reasons for and regulatory and
market implications of increasing gamification, self-directed trading and the influence of social media on
retail investor behavior.

Since the onset of the COVID-19 pandemic, IOSCO has observed rising cases of misconduct and reported investor losses, some of them cross-border in nature. T he report also explains how IOSCO members address these evolving misconduct trends, including through the use of advanced technological tools. The findings of the report are largely based on a comprehensive survey that IOSCO conducted in 2021 and public information issued by IOSCO members.

The consultation report also builds on a report the IOSCO Retail Market Conduct Task Force (RMCTF)
issued in December 2020, which describes how the COVID-19 crisis impacted firm and retail investor
behaviour. Its findings indicated that extreme price volatility during March-April 2020 and the growing
pressure of COVID-19 on firms’ profitability may have increased the offer of riskier products and the
flow of retail investment into such products. It noted that retail investor vulnerability can take many forms and vulnerable investors may be more susceptible to financial exploitation during periods of market stress.

In its consultation report, IOSCO seeks feedback from a broad range of stakeholders, including investors, regulators, market participants, regulated entities, financial consumers, academics and other international bodies. To inform IOSCO ́s work, the report includes fourteen consultation questions.

IOSCO

© IOSCO