More paternalism in the regulation of consumer financial investments? Private sector duties and public goods analysis

Abstract

Paternalistic forms of regulation for the retail investment market have been gradual and restrained, even though significant gaps exist between investors’ needs and market-based provision. As ordinary citizens reckon with a variety of savings needs and become financial citizens responsible for their own financial welfare provision, financial health is not merely an issue of individual fortunes but a social need. Adverse financial welfare consequences can at scale become a social issue, as is reflected in the social demands and critique entailing from the collapse of London and Capital Finance in the UK. The need for more regulatory paternalism goes beyond preventing mis-selling, and the outworking of welfare beyond point-of-sale remains relatively unconsidered. Post-sale welfare is, however, increasingly recognised for consumer credit and is slower to catch on in relation to savings needs and investments. This paper advocates that the regulator should not remain ambivalent about the need for more paternalistic interventions. Paternalistic protection is not only about shifting more burdens to the industry but also about the provision of public goods where there are standardised baseline needs for retail investors. This paper unpacks the roles of both the public and private sectors in addressing retail investors’ financial welfare needs.

Product Governance Regime of MiFID II as the Managerial Application of the PDCA Cycle

“…Misselling can also take place with respect to regulated products, when consumers purchase what is unsuitable for them, advised or otherwise. Investors can also be let down by severe losses due to adverse market forces, such as during the onset of the global financial crisis, or as a result of investment managers' suboptimal strategies (Chiu, 2021).…”