IOSCO final report on neo-brokers

The International Organization of Securities Commissions (IOSCO) has published its final report on neo-brokers. These are a sub-set of digital-first broker-dealers leveraging social media and online platforms to provide low-cost, online-only investment services with minimal human interaction. While these evolving business models enhance market access, IOSCO highlights the associated risks and provides five key recommendations for regulators and firms to ensure that neo-brokers operate in an environment that upholds investor protection and market transparency.

These include: (i) acting honestly and fairly with retail investors; (ii) providing clear disclosure of fees and charges to retail investors and advertising; (iii) ensuring transparency of revenue and obtaining consent before providing ancillary services; (iv) assessing the impact of payment for order flow on the best execution of customer orders; and (v) maintaining robust IT infrastructure to prevent service disruptions.

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