Retail investors and financial service clients should be empowered to seek compensation when they are harmed by misconduct, says the CFA Institute.
“Despite recent regulatory reform, mis-selling remains a top concern for investors and in many countries, supervision has so far largely ignored redress and focused only on fining misconduct,” says Mirzha de Manuel Aramendia, director of capital markets policy at CFA Institute. “Effective redress is central to enhancing market discipline, investor trust and participation in the financial markets.”
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With the appropriate mechanisms in place, investors will be able to seek compensation in a fast and cost-efficient manner, de Manuel Aramendia adds.
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CFA recommends national authorities increase the availability and quality of redress mechanisms in retail financial markets by:
- Ensuring retail investors can access out-of-court alternative dispute resolution by setting up industry-wide systems that can issue binding decisions and where participation is compulsory for service providers.
- Providing guidance on how alternative dispute resolution mechanisms are applied to financial markets.
- Increasing transparency and comparability between systems and jurisdictions.
- Strengthening the financial dispute resolution network with the capacity to monitor dispute resolution systems across the EU and to aggregate and publish all relevant information.
- Enabling the relevant public authorities to set up special-purpose dispute resolution systems in cases of wide-scale investor harm.
- Developing a common supervisory approach in Europe regarding the monitoring of complaints, cooperation, and the exchange of information.