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In a new, emboldened effort to address the rise in retail investor fraud and manage the risks posed by technological advancements, IOSCO has today launched a new Roadmap for Retail Investor Online Safety (the ‘Roadmap’).
This strategic initiative aims to safeguard retail investors worldwide from fraud, excessive risk and misinformation as digital trading and social media reshape the retail financial market.
IOSCO’s Roadmap addresses these emerging risks by focussing on enhancing investor education and promoting robust regulatory frameworks to better protect retail investors. This initiative reflects IOSCO’s commitment to building a safer, more transparent, environment for all retail investors engaging with online financial markets.
With five waves of targeted actions planned over the next 12 months, IOSCO’s Roadmap introduces a comprehensive approach focused on regulation, education and collaboration to address emerging digital risks, that stem from technological developments and increasing impact of social media on retail investor decisions.
As part of the regulatory strategy, the outlines measures to address practices like copy trading and the influence of finfluencers, who often share unregulated advice on social media.
The first wave, published alongside the Roadmap today, delivers three Consultation Reports:
First, a Consultation Report on Finfluencers - While Finfluencers help make finance accessible particularly to younger investors, they also pose risks by potentially spreading biased information and promoting high-risk products without adequate conflict-of-interest disclosures. IOSCO's Consultation Report elaborates Good Practices for regulators, market players, and Finfluencers to foster a safer, more transparent environment for retail investors.
Second, Copy Trading - This popular approach, often focused on short-term strategies in complex and volatile markets such as foreign exchange and crypto-assets, exposes retail investors to significant risks through automated, high-risk trading decisions. IOSCO’s Consultation Report provides Good Practices to guide regulators in strengthening oversight of copy trading platforms, helping protect investors from potential harm.
Third, Digital Engagement Practices (DEPs) - DEPs, such as gamification and targeted prompts, make investing more accessible and engaging, particularly for younger investors. While DEPs can boost financial literacy, they may also encourage excessive trading, steering investors toward high-risk products. IOSCO’s Consultation Report calls for a balanced approach, setting Good Practices to ensure DEPs promote informed and safe trading behaviour.