In the face of growing threats to investors online, the International Organization of Securities Commissions (IOSCO) called on regulators, law enforcement and policymakers to increase efforts to tackle the problem.
In a statement, the umbrella group of global securities regulators said investors face threats such as investment scams and frauds, “inappropriate” investment promotions, and misleading advertising and social media content.
“While the misconduct patterns might be familiar, the ease of such online misconduct and the borderless nature of the online environment present new and growing challenges as novel forms of cryptoasset or technology-based fraud are increasing,” IOSCO said.
At the same time, increasingly sophisticated artificial intelligence (AI) can magnify “the scale and impact of harmful online activities,” IOSCO warned. However, AI can also provide “new and powerful ways for regulators to detect, deter and disrupt such activities.”
IOSCO stressed that it welcomes increased retail investor participation and retail trading online.
“Such activity greatly contributes to financial inclusion and development of capital markets,” it said. “However, there has been a parallel rise of ‘bad actors’ using sophisticated but fraudulent tactics to build trust and exploit vulnerabilities and opportunities.”
IOSCO called on investors to be alert to online fraud and scams: “Regulators continue to receive numerous complaints about the online promotion and distribution of illegal products and services, and the widespread losses that retail investors are suffering around the world.”
The regulatory group also acknowledged that online schemes can be particularly tough to tackle, as the activity is “widespread, borderless and it is difficult to physically locate perpetrators.”
IOSCO also recommended that regulators seek greater powers and expanded jurisdiction “to ensure they continue to provide an appropriately high degree of investor protection within the increasingly complex online environment.”
To that end, IOSCO also called law enforcement, policymakers, social media platforms and search engines to join global efforts to reduce online harm.
“We urge retail investors to only use reliable sources of information; to not invest too much money in one single product; and to never invest more money than you can afford to lose,” said Jean-Paul Servais, chairman of IOSCO, in a release.