U.S. regulator’s new challenge: educating rookie investors

In a world where trading tips are swapped on TikTok and short squeezes are conceived on Reddit, regulators are looking for ways to connect with this new cohort of retail traders.

In a special notice, the U.S. Financial Industry Regulatory Authority Inc. (FINRA) is seeking insight from the industry, investor advocates and others about how to best reach new investors, particularly those who’ve been drawn to the markets recently to trade for free through mobile apps.

“As markets and trading platforms evolve, and as evidence emerges to suggest that newer retail investors have markedly different attitudes, characteristics and behaviours than their more experienced counterparts, the time is ripe to rethink how best to engage and educate investors with a diverse array of needs and priorities, especially those who opt not to work with an intermediary,” FINRA said in its notice.

In particular, over the past 18 months, new retail investors have “entered the markets in unprecedented numbers,” it said, noting that they are typically using self-directed accounts at online brokers that have reduced barriers to entry.

Now, the self-regulatory organization is seeking feedback that will help inform its investor education efforts and the work of the FINRA Investor Education Foundation.

“Given the recent influx of novice retail investors into U.S. securities markets coupled with rapid advancements in technology, FINRA requests comments from firms, investors, investor advocates, academics, investor and financial education providers and other stakeholders concerning effective ways to reach today’s investors,” it said, adding that it’s particularly interested in connecting with “younger, novice” investors.

The deadline for feedback is Aug. 31.

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.