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Research has always been an integral instrument in the financial market. It is skillfully welded by regulatory bodies to monitor the activities of various market players. In line with this structure, the Cyprus Securities and Exchange Commission (CySEC) has studied retail investors' behavior.
The CySEC released the study in January 2023. The study's findings reveal current investor decision-making trends and the difficulties authorities face in protecting investors' interests.
Details of CySEC's Study of Retail Investor Behavior
The study is centered on investors' preferences for financial products, inquiry methods, and investment platforms. The regulator interviewed selected retail investors who transacted financial items regularly.
The survey indicated that only 42% of retail investors do a background check on the items they intend to purchase. 37% of retail investors rely on recommendations from friends and family, and 22% on digital ads and endorsements. Shockingly, only 31% of retail investors seek financial advice from professionals.
The survey statistics were further classified by nationality and suggested that about 34% of investors in the UK and Germany and 48% in France seek financial advice from professionals. In contrast to this percentage, only 14% of retail investors in France and Germany and 24% in the UK show interest in product ads.
According to CySEC, 31% of investors make financial decisions based on the recommendations of financial influencers. These influences are popular on platforms like YouTube, Twitter, TikTok, and Instagram. The statistics reveal that 42%, 24%, and 34% of French, German, and British investors, respectively, rely on the recommendations of financial influences.
Because of the risk associated with poor investment choices, CySEC has raised the alarm that not all the information on social media should be believed. A representative of the CySEC said, "Too many investors, especially young people, are taking serious financial risks because they follow advice and recommendations from unreliable sources."
The study also reported that only 25% of Cyprus's investors spend about a week studying a product, while 7% do so in less than 30 minutes. Furthermore, 26% of Cypriot investors had staked more money than they could bear to lose, and only 34% displayed buyer's remorse after purchasing a product.
Roles of the CySEC
CySEC was established as a public, corporate organization in 2001 under section 5 of the Cyprus Securities and Exchange Commission Law of 2001. The regulator is saddled with responsibilities to oversee the Cyprus Stock Exchange's operations, govern Licensed Investment firms and apply disciplinary penalties.
Recent changes to the law regulating CySEC's duties have given it enormous authority over the firms it monitors. This allows it to conduct investigations, access properties, conduct searches, and discuss results with international authorities.
