IOSCO’s releases report on investment risk education

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The Board of the International Organisation of Securities Commissions (IOSCO) has released its final report on sound practices for investment risk education.


The study identifies a number of sound practices for investment risk education initiatives, based on an analysis of the approaches and practices adopted by the members of the IOSCO committee on retail investors in designing and delivering their investment risk initiatives, as well as a review of literature on the topic.


In a report obtained from IOSCO’s website, the international regulator said it had long recognised investor education as a key strategy for enhancing investor protection, promoting investor confidence and fostering investor engagement in financial planning and decision-making.


Investor education is complementary to other tools such as regulation, supervision and enforcement, and is recognised in IOSCO´s guiding principles for securities regulation. In 2013, IOSCO created Committee 8 to conduct its policy work on retail investor education and financial literacy.


It said: “For the purpose of this report, investment risk is generally defined as the risk that an investment will not deliver the expected yield and/or lose value and comprises a range of underlying factors.


“Risk related to investment fraud, an assessment of mandatory disclosure requirements, financial product advertising and the use of financial advisors were beyond the scope of this project.”
The report examines the role of securities regulators in investment risk education and the challenges they face.

It also considers some of the different approaches and practices that securities regulators adopt.


The sound practices identified in the report include focus on influencing retail investor attitudes and behaviour, as well as knowledge develop initiatives that take an evidence-based approach in response to the needs of retail investors.

Also included are test initiatives with the target audience; develop initiatives that reach people close in time to the making of investment decisions that are promoted in a variety of ways to expand reach and interaction.


Some of the identified sound practices includes sending clear messages that are adapted for different target groups (e.g. beginner and more savvy investors) and for the different ways people access information; and use engaging content and delivery styles.


Others include design activities that are current and up to date with emerging new technologies and developments in financial markets; where relevant, develop investor education initiatives that complement regulatory actions to enhance impact; and develop evaluation frameworks and measures at the outset and seek to evaluate outputs and outcomes.

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