Retail investor issues get top billing on IOSCO agenda

Emerging threats to retail investors, ranging from the growing role of finfluencers and industry gamification practices to conflicts of interest in the brokerage business, are top issues on global regulators’ policy agenda.

The umbrella group of global securities regulators, the International Organization of Securities Commissions (IOSCO), issued an updated work plan that sets out its priorities for the coming year.

In the updated plan, IOSCO announced several new policy projects, including work that reflects regulators’ increased focus on artificial intelligence, tokenization and credit default swaps, along with added work on the transition plans of securities firms and asset managers, and on green finance.

Alongside these new priorities, the group said its work on retail investor protection issues will address risks in emerging areas including finfluencer activity, broker-dealer conflicts of interest, fractional asset trading and digital engagement practices.

Specifically, in the second half, IOSCO plans to launch a consultation on possible guidance to address the retail investor protection risks that arise from the growing role of finfluencers, with final guidance expected in the first half of 2025.

It also aims to issue a consultation in the second half that looks at the investor protection risks that stem from potential conflicts of interest in broker-dealers, including issues involving commission structures, payment for order flow and other conflicts.

A final report setting out recommendations for dealing with these issues is targeted for early 2025.

A separate project will review potential retail investor risks and misconduct arising from the use of digital engagement practices, such as the gamification of retail trading.

That review will analyze conduct issues, and potential investor harm, involving the investment industry’s use of digital engagement tactics, and will “develop recommendations to raise standards and provide a regulatory toolkit to facilitate alignment in this area.”

IOSCO will also be stepping up efforts to enhance international cooperation for preventing and investigating illegal online activities, including unregulated offshore firms offering risky products to retail clients.

That work will use outreach to social media platforms, internet providers and other firms to combat online fraud, along with an enhanced investor alert warning system, the group said.

In the second half of this year, IOSCO plans to publish its final report that seeks to arm local regulators with information on investor education and protection for retail investors in the cryptoasset sector.

“IOSCO’s constant engagement with regulators from all regions and different market types gives us a unique perspective on the key issues facing investors and financial markets,” said Jean-Paul Servais, chair of the IOSCO board. “Our proactivity to adapt our agenda to these issues is evident in this revised workplan.”

In the year ahead, IOSCO will keep strengthening its relationship with other global policy groups, including the Financial Stability Board, Servais said.