Global securities regulators have out their approach to promoting investor education and financial literacy, which notes the importance of industry collaboration in improving investor knowledge.
The International Organization of Securities Commissions (IOSCO) Tuesday published its final report on the Strategic Framework for Investor Education and Financial Literacy, setting out its role in enhancing investor education, and the role of research, particularly behavioural economics research in guiding investor education efforts. The paper is also intended to serve as a guide for IOSCO’s Committee on Retail Investors in its efforts to establish investor education initiatives that produce meaningful results.
“Investor education and financial literacy are a joint responsibility for investors, industry and regulators,” said Howard Wetston, chair of the IOSCO retail investor committee, and chair of the Ontario Securities Commission (OSC). “We were pleased to receive support from industry as well as offers for collaboration and partnership. We hope that we continue to hear what industry and others are doing to help improve financial outcomes for investors and we will consider how we can continue to collaborate in the future.”
The paper indicates that the committee’s strategic approach will include: reviewing IOSCO members’ current practices and approaches to investor education and financial literacy with a view to identifying effective techniques; providing a forum for sharing information; identifying emerging issues or themes in investor education; developing new and innovative approaches to investor education and financial literacy programming; and, reviewing research produced by other organizations.
“The challenge is to identify and utilise effective methods of delivering investor education and financial literacy materials and messages to investors,” it says. “Ultimately, improved financial skills and knowledge can lead to increased confidence and trust in the financial sector, and a greater likelihood that investors will participate in the securities markets. This, in turn, could benefit capital raising in general and promote greater market efficiency.”
However, the paper also acknowledges that investor education will never replace the need for regulation, as it “does not guarantee that investors will make better investment decisions or avoid fraud. It is recognized that investor education and financial literacy will only go so far in changing investor behaviour.”