International Organization of Securities Commissions Publishes Roadmap to Enhance Retail Investor Online Safety

The International Organization of Securities Commissions has launched a new roadmap for retail investor online safety. The 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.

With five waves of targeted actions planned over the next 12 months, IOSCO has launched the first wave by delivering three consultation reports on: (i) finfluencers—IOSCO explores the evolving landscape of finfluencers, the associated potential benefits and risks, and the current regulatory responses across jurisdictions. It highlights that many finfluencers are not familiar with traditional financial regulatory frameworks and may operate outside them, posing challenges for enforcement and oversight. The report identifies potential gaps in regulatory coverage, particularly for unregistered individuals who influence retail investors without the professional qualifications or oversight required of registered investment advice professionals. IOSCO proposes good practices for regulators, market players, and finfluencers to foster a safer, more transparent environment for retail investors; (ii) copy trading—this popular approach, often focused on short-term strategies in complex and volatile markets such as FX and crypto-assets, exposes retail investors to significant risks through automated, high-risk trading decisions. IOSCO proposes good practices to guide regulators in strengthening oversight of copy trading platforms, helping protect investors from potential harm; and (iii) digital engagement practices—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 considers its existing work, members' regulatory approaches to DEPs, and other international standards and guidance to identify potential issues and gaps. IOSCO calls for a balanced approach, proposing good practices to ensure DEPs promote informed and safe trading behavior. The deadline for comments on the three consultation reports is January 20, 2025.

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