Esma calls for increased focus on consumer protection

Author: Gemma Varriale | Published: 25 Sep 2013
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  • Despite the wave of reforms since the financial crisis, there has been slow progress in financial consumer protection;
  • Steven Maijoor, chair of the European Securities and Markets Authority, has called for protection of retail investors to be moved up the regulatory agenda;
  • Maijoor also addressed calls for a move towards a behavioural economics-driven regulatory model, cautioning that it raises difficult issues;
  • The question, said Maijoor, is where to draw the border: regulators cannot take full responsibility for investors.

Six years after the financial crisis, and with plans for regulatory reform continuing apace, one of Europe’s top regulators has called for consumer protection measures to be moved up the agenda.

Steven Maijoor, chair of the European Securities and Markets Authority (Esma), was speaking during the International Organization of Securities Commissions (IOSCO) annual conference in Luxembourg last week.

The EU’s packaged retail investment products (Prips) proposals are a central feature of post-crisis reforms targeting financial consumers. They are aimed at structured products, which give retail investors easy access to financial markets, but can be complex to understand.

The achievements on the financial consumer side have been relatively modest, said Maijoor.

"Moving to the end part of the regulatory reform, we need to make sure that financial consumer protection gets the right attention and is a solid building block of regulatory reform," he added. "We need to move more quickly on to that part."

Further reading

ASIC: why behavioural economics is the future

Financing SMEs: what Europe can learn from Korea

How to build a finance hub: the secret to Malaysia’s success

The five steps to developing high-growth markets#

Charting a new frontier

Maijoor also addressed calls for a move towards a behavioural economics-driven approach to regulation, cautioning that it raises difficult issues.

According to Maijoor, moving away from neoclassical economics has clear policy implications for regulators.

"On the basis of the behavioural economics model, we are now going in the direction of possibly banning certain products, and intervening in the remuneration of the sales people in investment firms," he said.

But the question, said the EU regulatory chief, is where to draw the new line for financial markets supervision.

"Clearly we need to move but somehow and somewhere we need to stop," said Maijoor. "We cannot take full responsibility for the decisions of investors."

Indeed, according to Howard Weston, chair of the Ontario Securities Commission and a speaker on the IOSCO panel, it remains to be seen whether securities regulators are now moving towards a gatekeeper role.

If they’re becoming more like gatekeepers, you’re more or less implying you would ban products, said Weston. "You can work a lot with a firm on the product they want to distribute and you can work it so hard that eventually it doesn’t reach the public."

See also:

ASIC: why behavioural economics is the future

Financing SMEs: what Europe can learn from Korea

How to build a finance hub: the secret to Malaysia’s success

The five steps to developing high-growth markets