By Demetra Kalogerou
The dynamic development of capital markets in Europe, resulting from the companies’ increased need for alternative funding sources, as well as the technological advancements that consistently produce new financial products and services, have created an environment that offers opportunities for the investors and supervising authorities, but at the same time presents risks.
In this context, it is all the more necessary to continue educating the investing public. To this end, the International Organisation of Securities Commissions (IOSCO) has been organising the World Investor Week since 2017, aiming to help educate and protect investors and the public at large.
The Cyprus Securities and Exchange Commission has participated in the World Investor Week 2019 for the very first time, by publishing warnings and providing material, information and advice, thereby contributing to the continuous training of the investing public. This past week (September 30-October 6), CySEC has displayed and promoted the messages of the IOSCO initiative through its website and social media accounts. With its publications and articles in the press, CySEC has also highlighted the importance of continuous financial training and adequately informing the public and the investors, with a view to enhance their capacity to make key financial and investment decisions.
Interventions and warnings
CySEC is closely monitoring market developments and intervenes when it believes that it has to protect or warn the investing public. Recently, CySEC published a Warning on the risks that may arise due to the historically low – or even negative – bank interest rates. This environment creates a fertile ground for various entities that want to take advantage of the public’s search for higher returns, by offering complex investing products. Investors often do not fully understand the way that these products work and the risks they involve, and as a result, they could suffer significant losses.
In order to be adequately protected, investors are called to assess the companies they are about to do business with when it comes to their registration and supervision status. Specifically, they must ascertain that these companies are authorised by using CySEC’s website and if they are not sure about a new investment, they should seek out advice from licensed professionals.
Formulating a national strategy
Prevention, as a protection measure, is highly important for CySEC. In this framework, CySEC has studied practices in other jurisdictions and submitted specific suggestions for the formulation of a national strategy, in order to tackle financial illiteracy. In May 2016, CySEC sent a letter to the education minister, suggesting that a subject covering basic economic and financial knowledge should be incorporated in the core lyceum curriculum. In May 2018, CySEC presented the president with a proposal for the configuration of a wider policy that aims to tackle financial illiteracy and increase the public’s financial knowledge, focusing on vulnerable groups.
It is the position of the Cyprus Securities and Exchange Commission that an investor with sufficient financial knowledge and a formed opinion about the available investing choices, can more easily perceive possible investment risks and make the appropriate decisions for the management of their funds. It is crucial that all investors are aware of the key characteristics of the securities market as well as the investment risks that may arise.
Demetra Kalogerou is chairwoman of the Cyprus Securities and Exchange Commission