The legal and financial position of the consumer in the securities market must be safeguarded as well as possible. Non-professional consumers acting as investors are vulnerable as buyers of complex and difficult-to-understand investment products.

The consumers are increasingly expected to make arrangements for such as their future pension security through private savings and investment products. More and more consumers also invest their savings in the hope of a return.

An effort has been made to secure the consumer’s position by expecting the trader to provide increasingly extensive information about the product content and by introducing the “know your customer” principle. Despite these measures, however, it is not unusual that savings or investment products have been sold to a consumer who has not fully understood their contents. New instruments drawing on behavioural economics are needed to improve the situation.

In the overall reform of the Securities Market Act, the teachings of behavioural economics can be tapped in regulating the summaries that must be provided for consumers, for example under the Act on Investment Firms. The contents of these summaries should be standardised, their presentation should be designed to attract attention and their format should be short with focus on key information.

The Consumer Ombudsman’s competence to be specified

Chapter 10 of the Act on Investment Firms deals with operating practices in a customer relationship. This is a completely new section of the Act on Investment Firms that applies to practices that traditionally also are regulated under the Consumer Protection Act.

Even if the Consumer Ombudsman is competent to supervise practices used when offering financial services under the Consumer Protection Act, the legislation should also invest the Consumer Ombudsman with competence to supervise compliance with Chapter 10 similarly to what is provided on the Consumer Ombudsman’s competence in the Payment Services Act. This would enhance both consistent case law and the consumer perspective in the marketing of investment products.

Collective action to be introduced

The Finnish Consumer Agency feels that a collective action as a means of redress would also be highly suitable in disputes on the marketing practices or contract terms of securities, as these may involve numerous similar disputes. A collective action would be suitable for cases concerning the legal evaluation of the same marketing material or contract clause.

The government proposes the use of a collective action in certain issues concerning investment funds. The scope of the collective action should be expanded further to apply to all offers of securities to consumers.

KUV/9535/48/2011