Protecting Investors: A Perplexing Question of Balance

A series of outstanding issues is yet to be addressed in Australia in the fallout from the global financial crisis. In the balance is the need to determine the right level of disclosure for financial products and whether tougher regulation is really necessary. Complicating decisions for policymakers is the huge gap in investor sophistication – where many have a deep understanding of risk and how markets work, while others have next to none. A national program to improve financial literacy offers one solution, suggest experts. But will that be enough? Increasing regulation may bring further complications as overprotecting investors could strangle innovation.