The retail investor and the EC

Abstract

The importance of the retail markets This book examines the nature of retail investor protection. It considers the protections which do, and those which should, apply to individual, private investors who purchase investment products, take investment advice, carry out direct trading and, overall, engage in short-term speculation or long-term savings through market-based instruments. Its case study is the massive EC regulatory regime for the retail investment markets. This regime has grown exponentially in recent years and now dictates the nature of retail investor protection ‘on the books’ for the twenty-seven Member States of the European Union. But, as discussed throughout the book, retail market protection is not simply a function of ‘law on the books’. Effective retail market protection depends heavily on ‘law in action’. And ‘law in action’, in terms of, for example, innovative supervisory strategies, product design initiatives, retail market research, investor redress and investor education, is largely the preserve of the Member States. The book's main case study for domestic ‘law in action’ is the UK and the Financial Services Authority's increasingly strenuous efforts in the retail markets. But the book adopts a generally comparative approach, drawing on international experience and experience in the other Member States. Why consider the retail markets and retail market regulatory design? As discussed in chapter 2, the financial crisis has wreaked destruction on household market savings; it calls for careful consideration of the role of regulation in the retail markets.