ASIC and IOSCO report on retail market conduct issues arising from COVID-19

IOSCO’s Retail Market Conduct Task Force (RMCTF), co-chaired by ASIC and the Central Bank of Ireland, has today published the Retail Market Conduct Task Force Report: Initial Findings and Observations About the Impact of COVID-19 on Retail Market Conduct.

Commissioned by the IOSCO Board, the Report responds to the economic uncertainty global markets experience during crises and identifies preliminary observations of common retail market conduct issues experienced across jurisdictions during COVID-19, to support IOSCO’s work in enhancing investor protection and promoting investor confidence in the integrity of markets.

The IOSCO Report outlines key observations of the retail market conduct risks caused or exacerbated by COVID-19 including the:

  • unique market environment emanating from the pandemic;
  • impact on firm and investor behaviour;
  • common drivers of retail misconduct; and
  • corresponding challenges and opportunities for regulators.

In addition, the Report identifies a number of common themes experienced during COVID-19 which highlight the vulnerabilities and risks for retail investors, market participants and regulators including:

  • high market volatility;
  • heightened financial and psychological stressors;
  • social distancing and remote work requirements; and
  • an increase in aggressive advertising, on-line marketing and digital offerings of financial products that may target vulnerable investors.

The Report also highlights case studies specific to member organisations, for example that Australia experienced a surge in retail investor trading, an increase in predatory scams and unlicensed financial advice during COVID-19 (20-102MR). ASIC’s priorities in response to COVID-19 include protecting consumers from harm at a time of heightened vulnerability, continuing to identify, disrupt and take enforcement action against the most harmful conduct and maintaining financial system resilience and stability (20-086MR).

Further, to address the identified risks and promote investor protection the Report suggests practical regulatory tools member organisations can utilise such as:

  • proactive supervisory monitoring including of offerings targeting vulnerable investors;
  • targeted and effective enforcement action;
  • close cross-border cooperation and regulatory coordination; and
  • leveraging the experience from previous crises to enhance agile regulatory approaches.

Download

Retail Market Conduct Task Force Report: Initial Findings and Observations About the Impact of COVID-19 on Retail Market Conduct

Background

In February 2020, the IOSCO Board established the RMCTF (comprising 14 member organisations from Australia, Ireland, Belgium, Brazil, China, Germany, Hong Kong, Japan, Mexico, Quebec, Singapore, Spain, UK, USA) to examine retail misconduct risks arising in the financial services industry. Due to the pressures and turbulence caused or exacerbated by the COVID-19 pandemic the IOSCO Board asked the RMCTF to focus on COVID-19 related retail conduct implications and to consider the types of misconduct exacerbated by or resulting from the crisis and prepare measures to assist IOSCO members to address the conduct challenges.

The RMCTF represents work undertaken by securities regulators globally to prevent, detect and respond to retail misconduct issues that impact trust in markets and investor confidence.

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