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Regulators | |
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Tuesday, April 02 2019 03:53 PM / IOSCO
The Board of the
International Organization of Securities Commissions today published a report
on behavioural insights that seeks to help its members improve the
effectiveness of retail investor protection.
The report, The
Application of Behavioural Insights to Retail Investor Protection, provides
guidance to help regulators better understand the behaviour of retail investors
in making financial investment decisions.
The report describes
behavioural biases and how they affect retail financial markets. The examples
given in the report show how emotions and psychological experiences can
influence investment decisions; how a rule of thumb can lead to incorrect
beliefs; and how a partial assessment of information can lead to a different
decision than a complete assessment.
The report finds that
individuals tend to make different decisions when interacting with an online
interface as opposed to interacting with a human or relying on print materials.
The report also refers
to quantitative and qualitative testing methodologies that regulators use to
gather information about the ways in which retail investors may suffer harm.
These same methodologies can be used to design and measure the effectiveness of
the regulatory response to protect investors and to assess the effectiveness of
existing disclosure and other measures.
The report
acknowledges that while measures using behavioural insights have the potential
to promote informed decision-making, they may not be sufficient to protect
retail investors adequately. Accordingly, it is important that regulators
continue to impose standards of conduct on investment professionals and
regulate the sale of investment products to promote retail investor protection
further.
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