COVID-19: IOSCO releases insights to help capital market regulators contain risks
The Board of International Organisation of Securities Commissions has published a report that seeks to assist regulators in responding to the retail market conduct issues caused by stress events such as the current COVID-19 crisis.
According to the commissions, enhancing investor protection and investor confidence in the integrity of securities markets are fundamental objectives for IOSCO.
The report examines common retail misconduct risks that have arisen in the financial services industry during the pandemic and sets out measures to assist authorities in responding to this unprecedented and challenging environment.
The report, prepared by IOSCO´s Retail Market Conduct Task Force (RMCTF), shares preliminary findings and observations of IOSCO member experiences and identifies the common drivers of firm and retail investor behaviour, which together create increased opportunities for potential misconduct in periods of stress.
Drawing on case studies from IOSCO members, the report also describes the measures that IOSCO members have used to mitigate these risks and derives lessons from their experiences.
The report describes how the COVID-19 crisis impacted firm and retail investor behaviour. IOSCO findings indicate that extreme price volatility during March-April 2020 and the growing pressure of COVID-19 on firms’ profitability may have resulted in increased offerings of riskier products and retail investor flow into such products.
The COVID-19 experience also highlights that retail investor vulnerability may take many forms and vulnerable investors may be more susceptible to financial exploitation during periods of market stress.