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Senior investors in particular face greater risk of becoming victims of fraud, being misled or taken advantage of. As investors age, they may face new challenges such as cognitive impairment due to health and age reasons as well as mental health issues arising from greater social isolation10. For some senior investors, these challenges are compounded by a background of limited education and financial literacy – all of which can affect their judgement and decision-making capacity when it comes to investments. This is already apparent in Malaysia – senior citizens are often targets of various syndicates, ranging from phone scams and sweepstakes to more complex scams which involve impersonation of figures of authority. Most scams or fraud activities target the life savings of these senior citizens, regardless of net worth, and take advantage of their vulnerabilities.
There are also segments of investors who are vulnerable due to the lack of decision-making capability. This could include both individuals and entities that lack the knowledge or understanding of financial products and investment experience. Losses experienced by entities that lack knowledge often impact the savings of the individuals they represent. The growth in digitisation within the capital market has also exposed vulnerabilities among investors who lack the knowledge to protect themselves in the digital age.
Today, intermediaries and institutions are expected to treat all investors fairly, have clear and effective disclosures, and where necessary, conduct suitability assessments. Investor programmes, events and alerts have been put in place to raise awareness about fraud and scams. There are also multiple programmes to raise the bar on investment literacy. Moving forward, there is greater imperative to enhance the regulatory approach to cater to investors who are more susceptible to vulnerabilities, especially senior investors. This becomes more important as Malaysia’s population ages and more Malaysians are expected to make decisions on their retirement savings – how they invest or drawdown their savings during retirement.
Securities regulators globally have mainly focused on senior investors. In a related IOSCO survey, most jurisdictions still do not have explicit legislation or regulatory requirements focused on senior investors as many indicated that senior investors are protected under general rules for investors.11 Some jurisdictions have started making changes, with notable considerations outlined in Diagram 21. Most jurisdictions are focusing on investor education to empower vulnerable investors to protect themselves as well as making available dedicated resources or launching research projects to better understand issues faced by senior investors. Some have guidelines identifying best practices when interacting with senior investors – the requirements of which vary across different jurisdictions. Some require additional steps to be undertaken when onboarding senior investors, while others require a more comprehensive approach in the sales and post-sales practices. In designing the regulatory approach for the SC, there is a need to consider issues and challenges faced by vulnerable investors in Malaysia as well as the capabilities of market participants to identify and cater to vulnerable investors.
Within the SC’s supervisory and enforcement functions, focus will be directed towards early detection and action against misconduct relating to vulnerable investors. Actions to deter misconduct using the variety of statutory tools designed to protect investors will be considered at the onset. Industry collaboration, which is a pillar of the SC’s regulatory outreach, will continue to be prioritised along with developing best practices to shape behaviour among market participants. These efforts will be underpinned by stronger advocacy in investor education programmes to boost awareness and understanding on risks and issues relating to vulnerable investors. This includes adopting greater use of social media platforms to alert vulnerable investors on possible scams or unlicensed activities and enhancing investor outreach programmes to be more targeted towards senior and rural investors.
Social Isolation In Older Malaysians: Prevalence and Risk Factors, Rahimah Ibrahim, Yadollah Abolfathi Momtaz, Tengku Aizan Hamid, 2013.
Senior Investor Vulnerability, IOSCO, March 2018.
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