Retail investor protection under review in EU

With the emergence of meme stocks, a surge in retail trading and the ongoing rise of robo-advisors, European securities regulators have launched a consultation on retail investor protection.

The European Securities and Markets Authority (ESMA) is seeking feedback on a range of retail investor protection topics.

Among other things, the consultation aims to examine the risks and opportunities that have emerged in the retail investment business with the increase in retail trading, both through mobile apps and robo-advisors. In particular, it’s examining how well safeguards, such as best execution standards and risk disclosure requirements, work in a world of meme stocks and other modern retail trading trends.

The review will also consider how well disclosure rules are working for retail investors, whether investors are capable of making informed investment decisions under current rules, and whether they face information overload or excessive complexity in disclosure.

Along the same lines, ESMA is also looking at how digital disclosure can work for investors, and how the rules could be changed to utilize layered information, among other considerations.

ESMA plans to hold a public hearing in the fourth quarter to review the issues raised in the consultation, which will run until Jan. 2, 2022.

The results of the review will help inform ESMA’s advice to the European Commission on possible reforms to retail investor protection. That advice is expected in the first half of next year.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.