IOSCO publishes final measures for regulators to consider in addressing emerging retail market conduct issues

IOSCO has released a Final Report on Retail Market Conduct. This report is a response to the changing macro conditions, demographic trends, and technological developments that have influenced the retail trading landscape
The Retail Market Conduct Task Force of the IOSCO Board led the preparation of the report. This task force includes the Australian Securities and Investments Commission and the Central Bank of Ireland. The report is a follow-up to the IOSCO Report on retail market conduct implications of the COVID-19 pandemic and a Consultation Report published in December 2020 and March 2022, respectively.
The report identifies various retail trends and sources of potential retail investor harm in an increasingly online environment. Social media is now a significant source of information, and the digitalization of financial services and online distribution methods provide fraudsters with cheaper and easier ways to spread false information to a wider target audience. Digital promotions and online marketing are also used to facilitate fraudulent activities, leading to crypto-asset scams and greenwashing as examples of misconduct.
The IOSCO report suggests that regulators need to address retail investor harm at its source. They can use technological tools to eliminate detrimental online marketing channels, identify misconduct early on, and intervene rapidly. Furthermore, IOSCO highlights the persistent challenges related to cross-border supervision and enforcement of misconduct, emphasizing the importance of cooperation between jurisdictions in combating financial fraud on a global scale.
The report presents a toolkit for regulators to consider when dealing with retail market conduct issues. This toolkit includes various innovative approaches, such as heightening regulators‘ digital presence and online strategy, honing approaches to identify and mitigate misconduct, enhancing cross-border and domestic supervisory and enforcement cooperation frameworks, addressing retail investor harm that stems from crypto-assets, and implementing new regulatory approaches against retail misconduct. The report suggests that the measures outlined in the toolkit are adaptable and can be tailored to meet the specific requirements of each jurisdiction.