Financial Planning Standards Board (FPSB), the standards-setting body for the global financial planning profession and owner of the international certified financial planner certification, submitted recommendations to the IOSCO Retail Market Conduct Task Force on how regulators around the world could address the potential adverse impacts of the rise of complex financial products, technology innovation and social media / fin-fluencers. 

FPSB's submission on 1 June responded to the consultation led by IOSCO to inform the development of a regulatory toolkit for jurisdictions around the world to increase efforts to prevent retail investor harm. 

FPSB and its global network of non-profit certification and professional bodies certify more than 203,000 CERTIFIED FINANCIAL PLANNER professionals around the world. 

FPSB's submission, which draws on feedback from 886 certified financial planners across 13 different countries and territories and 16 FPSB affiliate organizations with decades of experience developing professional competency, ethics, and practice standards for the financial planning profession, highlighted the important role the global financial planning profession plays in supporting IOSCO members seeking to better protect investors.

IOSCO's consultation comes as retail market conduct issues are escalating on a global scale in the context of the COVID-19 pandemic, rapid technological developments, and an increasingly complex and changing retail trading landscape. 

FPSB's submission to IOSCO provided recommendations on issues including the impact of social media and ‘fin-fluencers', and the need to regulate crypto assets and ensure that all who provide (or who are deemed to provide) financial advice are appropriately qualified to do so and held accountable for that advice, including fin-fluencers. 

FPSB Head of Stakeholder Engagement Dante De Gori, CFP, said: "Financial fraud and scams are certainly not new, but the rapid emergence and evolution of crypto assets and other complex digital assets means the level of risk and exposure for retail investors is becoming heightened.

"Licensing and product regulation are struggling to keep up with this fast-changing landscape, leaving financial planners unsure of their regulatory obligations and leaving retail investors to go it alone, guided by marketing campaigns, often with harmful consequences." 

De Gori added: "FPSB, the FPSB Network and the global CFP professional community have a role to play in supporting IOSCO members seeking to better protect investors in their territories. FPSB has provided IOSCO with a series of recommendations that we believe will serve retail investors and support IOSCO members efforts to develop regulatory toolkits and other measures to protect retail investors." 

FPSB's recommendations to the IOSCO Retail Market Conduct Task Force included the following: 

  • IOSCO should conduct research to better understand the correlation between the investor's status - either ‘self-directed' or ‘advised' (i.e., acting on the recommendations of a financial planning professional) - and the investor's likelihood to experience unmanageable / catastrophic financial loss when investing in complex products (due to investment underperformance (measured against appropriate benchmark(s) or through being the victim of a scam / fraud). 
  • If IOSCO members continue to allow self-directed investing in complex products, self-directed retail investors' ability to access digital trading platforms should require successful completion of a ‘financial knowledge test' to demonstrate a minimum level of financial literacy and capability. 
  • IOSCO members should develop appropriate safeguards, such as the investor's need to obtain financial advice, before permitting use of ‘leverage' on complex products. 
  • IOSCO members should prohibit the use of credit cards to purchase complex financial products. 
  • IOSCO members should establish a regulatory ‘sandbox' for social media influencers (fin-fluencers) and publish those operating in the sandbox on a public register, i.e., a ‘Register of Qualified Fin-Fluencers'. 
  • IOSCO members should proactively engage with social media influencers (aka fin-fluencers) and reinforce the boundaries in which fin-fluencers can operate, i.e., information only if not qualified to provide financial advice. 
  • IOSCO / IOSCO members should engage technology platforms to develop cooperation agreements to suspend or ban individuals, product providers and other organizations using the platforms to defraud or scam investors, or otherwise breach securities laws. 
  • IOSCO should define ‘complex products' in a manner that can be consistently adopted across IOSCO member territories to protect retail investors (particularly, self-directed). 
  • As defined by IOSCO, all ‘complex products' should be regulated. 
  • IOSCO should conduct research into changing guidance for ‘complex product' providers to disclose (at the point of purchase) the percentage of retail investors who made a financial loss on the investment. Research should consider an appropriate timeframe for the disclosure, e.g., last 12 months, three years, five years or since inception. 
  • IOSCO members should introduce a cooling off / breaker period for ‘self-directed' retail investors who purchase a ‘complex product,' if such an investor protection mechanism does not already exist in the territory.