Investors support additional regulatory protections from broker misconduct, even if it raises costs

Nearly three-quarters of respondents said they would support more rules to protect them from broker misconduct.

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A majority of investors would support additional regulations to protect them from broker misconduct and unsuitable products, according to a just-released survey by the Financial Industry Regulatory Authority.

The FINRA online survey of 1,000 U.S. investors, which was designed to measure perceptions of fairness and to gauge demand for additional regulatory protections, found that that 92% of investors agreed (62% strongly agreed and 30% somewhat agreed) that it is important to have a regulatory cop on the beat to protect investors and police the markets.

The survey also found that 70% of investors surveyed strongly agreed and 24% somewhat agreed that it is important for regulators to use the latest tools and technology to protect them.

Nearly three-quarters of investors surveyed (74%) said they would support additional regulatory protections to safeguard them from misconduct by brokers or brokerage firms.

Support for more regulations was strong across age groups and investment levels. Only one in five of those surveyed (22%) opposed additional protections if it meant a minimal increase in the costs that brokerage firms passed on to them. By comparison, 56% of those surveyed said they would support additional protections even if it meant a minimal increase in their costs.

Other highlights of the survey include:

• 88% of investors believe it’s moderately or very important for regulators to detect when unsuitable securities are being sold to investors;
• 90% believe it’s moderately or very important for regulators to detect when brokers are making trades that benefit themselves and not the investor; and
• 89% believe it’s moderately or very important for regulators to detect when firms are taking risks that potentially harm their investors and the financial system.