Financial Authorities Demand Strict Enforcement on Security Tokens Replicating Shares
World Federation of Exchanges (WFE) Urges Regulatory Action to Protect Retail Investors
In a recent statement, the World Federation of Exchanges (WFE) has expressed concern over the potential risks to retail investors in the securities markets. The organisation's CEO, Nandini Sukumar, emphasised the importance of investor protection, particularly in light of practices that may mislead retail investors about their rights and protections.
The WFE's concern stems from the fact that in many cases, retail investors do not enjoy the same rights and protections as traditional shareholders. The organisation supports innovation based on exchange-traded products but believes that regulation must evolve to ensure that new technologies are not used as a mask for risk and opacity.
The WFE's statement refers to mimicked products that do not meet the high standards investors are accustomed to. Some firms are attempting to bypass regulation by seeking "no action" relief from regulators or operating through legal grey areas. This, the WFE believes, could lead to significant risks for retail investors.
The WFE's position is that regulation must prioritise investor protection. To this end, the organisation supports enhanced regulatory coordination and stricter oversight. This call for action comes in the wake of a letter written by the Organization for Economic Co-operation and Development (OECD) to the SEC Crypto Task Force, IOSCO's Fintech Task Force, and the European Securities and Markets Authority (ESMA). The letter highlighted growing risks for investor protection related to third-party tokenization of mainly US stocks by unregulated brokers and crypto-asset trading platforms.
The WFE's statement underscores the need for regulators to stay vigilant and proactive in ensuring the protection of retail investors in the rapidly evolving securities markets. By doing so, they can help maintain investor confidence and promote a healthy and sustainable market environment.
