IOSCO Surveys Use of Social Media and Automated Advice by Intermediaries .Publishes report

Thursday, 24 July 2014

The International Organization of Securities
Commissions (IOSCO) today published its Report on the
IOSCO Social Media and Automation of Advice Tools
Surveys. The paper presents the results of four surveys
on the use of social media and automated advice tools
in capital markets, and how regulators oversee the use
of these tools
IOSCO undertook the project on social media and
automated advice tools because technology, particularly
the use of the Internet, is changing the ways in which
market intermediaries interact with both potential and
existing customers. The work represents an important
international initiative to obtain data on previously
unknown issues and where use and oversight of these
mediums continues to evolve. Social media provides a means to multiply the number of interactions between investors and market intermediaries.The growing use of social media and automated tools by intermediaries also presents numerous
challenges to regulators.
During the second half of 2013, IOSCO surveyed market intermediary and regulatory practices in the
use and oversight of social media and automated advice tools in order to meet two overarching
(1) to gather data to understand more fully how market intermediaries are using these mediums
today and their plans for future use, and how regulators are overseeing such usage today and;
(2) to determine what unique challenges the use of social media and automated advice tools
present to regulators (if any) and whether it is appropriate to devise recommendations or principles
that regulators should consider in overseeing market intermediaries that use these mediums.
Results from these IOSCO surveys provide an interesting snap-shot of how regulators and
intermediaries use (or do not use) and oversee these technologies.
With respect to social media, key results include:
The use of social media by intermediaries is in its nascent stage but, across the globe, firms
permitting its use prohibit their staff from making recommendations or providing investment advice.
The most commonly used sites are Facebook, Twitter and LinkedIn.
Regulators have neither defined social media, nor prohibited its use by intermediary firms.
Increasingly, regulators are using social media sites in the supervision of firms to identify personal
relationships between parties and as a source of general information.
With respect to automated advice tools, key results include:
The use of automated advice tools is growing around the world. Intermediaries are using these
tools to assist with their suitability and Know Your Customer (KYC ) obligations.
When making recommendations, the vast majority of firms do so with respect to asset classes.
Specifically, collective investment schemes, mutual funds, exchange traded funds and equity classes
are the most common products recommended.
· None of the regulators who responded to the survey prohibits the use of automated advice tools, but
very few have specific rules or guidance related to their use. Rather, most regulators rely on, inter
alia, suitability, disclosure, supervision and record keeping rules.
The report notes that it is too early to identify the unique challenges posed by social media and
automated advice. Nor can definitive conclusions be drawn about the best practices in the use and
oversight of these mediums. Nonetheless, the exercise has helped regulators understand how
intermediaries use these tools and the challenges involved in overseeing them.
Over the coming 12 to 24 months, IOSCO intends to revisit these issues to determine whether
further work is warranted.

credit:IOSCO (The international organisation of securities commission)

posted by:@djshyluckjimmy.

Leave a Reply