The Ontario Securities Commission (OSC) has published a staff notice on behavioural insights (BI). The report outlines how global regulators use knowledge about human behaviour to address issues in capital markets and improve outcomes for investors and market participants.
In the report, ample research is provided that highlights how people fail to make informed and rational decisions, and are instead influenced by things like feelings, distorted memories, social norms, peer pressure and social biases.
For example, research shows people are more optimistic about tech-related stocks compared to other stocks of identical performance, simply because of frequent exposure to technological successes.
Behavioural differences in online decision-making using various devices are also addressed.
The report further enumerates how various securities regulators have applied BI approaches, including those in Europe, Australia, New Zealand, the U.S., Singapore and China. Applications tend to focus on conduct risk.
This year, the OSC will identify potential areas to apply BI in policy development and operational processes. The OSC will also conduct pilot projects for testing, using a BI lens.
Read the full report.
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