By Huw Jones
The EU’s executive European Commission is due this year to set out a retail investor strategy to catch up with rapid changes in technology which now allow people to buy shares or bitcoin with a few swipes on their smartphone.
The bloc wants more retail investor participation to help build a deeper capital market that relies less on bank loans to fund the economy.
“I believe these are fundamental shifts in how the market works and who engages in the market,” Verena Ross, chair of the European Securities and Markets Authority (ESMA) told Reuters.
“I think the downside of some of that is that it entices a lot of speculation, and a kind of gamification of the way retail investors engage in financial markets.”
The commission asked ESMA for advice and the watchdog set out several recommendations on Friday, including a revision of the bloc’s MiFID securities law to give national regulators powers to take “timely and effective actions” against misleading marketing practices.
The EU law should also include a definition of what constitutes marketing communications to clarify that online advertising is also covered, ESMA said.
Ross said there is also a need to ensure that financial promotions on social media contain “at a glance” information to investors.
“You should be able to not just see the headline that you can earn lots of money here, but also have the vital information on this, that it comes at a cost, this comes with a risk,” Ross said.
ESMA will do further work with national regulators to counter aggressive marketing and make sure firms are properly meeting requirements, Ross said.
ESMA also recommended that disclosure documents issued by banks and other financial firms should be machine readable to help create public databases, and aid comparison websites and “robo” advisors.
There should also be a standard format for information on costs and charges across financial products, it said.