The International Organization of Securities Commissions has published a report setting out principles for point-of-sale disclosure regimes.

The report, authored by the IOSCO Technical Committee’s Standing Committee on the Regulation of Market Intermediaries and the Standing Committee on Investment Management, sets out principles that are designed to assist markets and regulators when considering point of sale disclosure requirements.

The principles set out in the final report, include:

> disclosure should inform the investor of the fundamental benefits, risks, terms and costs of the product, and the remuneration and conflicts associated with the dealer selling the product;

> information should be delivered before the point of sale, so that the investor has the opportunity to make an informed decision about whether to invest;

> disclosure should be in plain language and in a simple, accessible and comparable format; disclosures should be clear, accurate and not misleading, and they should be updated on a regular basis; and

> the decision of who should disclose what (dealers or product manufacturers) should be guided by who has control over the information to be disclosed.

In addition to spelling out principles for POS disclosure, the paper points out that regardless of the disclosures that are mandated, they won’t be effective if investors don’t read or can’t understand the information provided.

“Regulators should therefore consider measures to help improve retail investor education in order to enhance their financial literacy and ability to read investment documentation and make informed investment decisions,” the paper suggests.

It also recommends that new POS disclosure requirements should not be imposed without consumer testing to help determine the likely effectiveness of new requirements.

IE