Regulators will have to get tougher to ensure effective disclosure, and adequate protection, for retail investors, suggested Susan Wolburgh Jenah in her final speech as head of the Investment Industry Regulatory Organization of Canada (IIROC)

Speaking at the Rotman Capital Markets Institute’s Discussion on Disclosure in Toronto on Tuesday, Wolburgh Jenah, who is due to end her time as IIROC’s first president and CEO on Oct. 31, noted that disclosure needs to improve its efficacy where retail investors are concerned.

“More effort needs to be focused on ensuring that disclosures directed towards retail clients in particular are relevant, concise, written in plain language and delivered at a point in time when they can have the most impact,” she said.

And, to do that, she suggested that regulators will have to get tougher about what they require from the industry. “To achieve these goals will likely require that regulators be more prescriptive than has been the case historically, as regards to the form, content and delivery of retail-focused disclosure in order to ensure consistency of approach and comparability across market participants,” she said.

Wolburgh Jenah also said that, while efforts to improve financial literacy and enhance investor education “are important complementary strategies”, they cannot be expected to eliminate the information asymmetry between investors and the industry. “They will ‘narrow the gap’ and help investors to be more confident and aware of the questions they should be asking,” she said; adding, “A more confident, aware investor is a better protected investor.”

At the same time, Wolburgh Jenah also said that boosting industry proficiency standards, and continuing education requirements, “should be a core regulatory strategy across all licensing categories and all sectors of the financial services industry.”

She also suggested that regulators should become more aggressive in ensuring that new investment products serve a useful purpose, rather than just ensuring that they meet disclosure requirements. “When market participants seek to introduce new market innovations or investment products, it is appropriate to ask them to identify their target audience and how they are expected to benefit from the innovation,” she said.

“The goal should not be to stifle innovation but to encourage market participants and intermediaries to also be thinking about these issues from a broader market integrity perspective,” she concluded.