Research Handbooks in International Law series
Edited by Geraint Howells, Iain Ramsay, Thomas Wihelmsson and David Kraft
Chapter 15: Financial Services Regulation and the Investor as Consumer
Dimity Kingsford Smith* 1. Introduction The day trader seems to live in the space between the categories of professional and non-professional market participants. In recent years, regulators in different jurisdictions have invoked distinctions between the rules that apply in the context of wholesale market transactions and those that apply in the context of retail market transactions, or between persons and firms who can be relied upon to look after their own interests and those who cannot.1 This chapter is a survey of the main issues and the prominent literature emerging on the regulation of retail investors as consumers. But as this quote suggests, it is not a simple matter to identify the investor, let alone what it means to say the investor is a ‘consumer’. The two ideas are not equivalent, although they do overlap. In recent years, this has been increasingly true. The idea of the ‘financial consumer‘ or ‘retail’ investor has gained greater definition through legislative provision and market practice. But as the quote suggests, there are plenty of tensions in the other direction, to persuade us to see retail investors as ‘sophisticated’ and not needing, deserving or even wanting the additional regulatory resources required to regulate them as ‘financial consumers’. At the same time as ‘consumer’ provisions are appearing in financial services regulation,2 more and more complex financial products are being * The author is very grateful for the research assistance of Dr YiJun Tian in the preparation of this chapter and for the comments of Ashley...
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