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Retail investors are holding onto their money and avoiding stock markets because their faith in the financial system remains deeply shaken even four years after the financial crisis began, Ontario Securities Commission chairman Howard Wetston said Tuesday.
Speaking at the OSC’s annual “dialogue” conference in Toronto, Wetston said financial regulators moved after the crisis to try to reduce the size of global financial firms, while also increasing transparency and reducing complexity of new financial products.
Instead, however, institutions have gotten larger and products are more complex and less transparent, he said.
Regulators in the meantime are still trying to respond to issues that arose in the financial crisis while new issues – such as the Libor scandal – keep emerging.
“And where are the retail investors?” he asked. “They continue to sit on the sidelines, their trust and confidence in the financial markets eroded.”
TMX Group chief executive officer Tom Kloet told the OSC conference a key to restoring investor trust is improved enforcement against those who break securities rules.
“The reality is that a system is going to lack confidence if people think that bad participants just get shuffled through the system and appear somewhere else,” he said.
In his remarks, Wetston said the OSC is increasingly focusing on taking cases to criminal courts, which allows for jail sentences to be imposed.
He said cases involving repeat offenders and people who breach OSC cease-trading orders are most often considered for criminal action.
The OSC currently has seven cases before the courts, he said.