18 November 2009

IOSCO consults on point of sale disclosure for Collective Investment Schemes – how to enable consumers to understand risks?

The report argues that consumers do not understand many key messages about charges, remuneration, conflicts of interest, and fund risks and features based on current disclosure regimes, and will commonly simply follow the advice of others.

The Report proposes a set of principles, for the disclosure of key information relating to collective investment schemes, designed to assist markets and market authorities when considering point of sale disclosure requirements in their respective jurisdictions.

 

Common Themes presented in the Report:

 

 

·         What do consumers want?

·         What ways of presenting information do consumers prefer?

·         How do consumers make decisions?

·         What are the limitations or biases with consumer decision-making?

·         What are the implications for consumer behaviour?

 

The research presents the following key conclusions:

 

·         Consumers do not understand many key messages about charges, remuneration, conflicts of interest, and fund risks and features based on current disclosure regimes, and will commonly simply follow the advice of others.

 

·         Investors would like the format and content of disclosures to be carefully designed to promote accessibility and readability.

 

·         When designing an appropriate point of sale disclosure, regulators may need to:

 

a)    Consider investor frames of reference, biases and emotions in order to enhance the likelihood of accurate investor comprehension of material facts.

 

b) Take into account the overall impact of information and the different contexts in which it may be used.

 

c) Consider how different forms of point of sale disclosure (e.g., documents or oral disclosure) may generate a meaningful and positive behavioural change.

 

The deadline for comments is 16 February 2010.

 

© IOSCO