Investors would be required to pass an online exam before investing in complex or risky products under a proposal by Greg Medcraft, the chairman of the Australian Securities and Investments Commission.
Medcraft told The Australian Financial Review he believes existing disclosure documents are no longer effective and new technology and innovative approaches are needed to protect investors.
Investors would be required to take "e-learning module" tests that could take up to two hours. The tests would examine investors' knowledge of financial products including margin loans, contracts for difference, derivatives and hybrid securities.
Potential investors could be shut out for 30 days if they failed the exam, which would have password protection to stop cheating.
"We have to start thinking about tools for investors which are not just disclosure," Medcraft told the newspaper.
"PDS [product disclosure documents] are not working for some [investors] and often it is not because they don't understand, they just don't have time. We are in a world where everyone is busy and I think we just have to start thinking more creatively."
The ASIC proposal follows the collapses of Banksia Securities, Trio Capital and MF Global, which hit many investors hard.
To read the entire article from Cara Waters at Smart Company.com.au, click here.
Or read this related article from Business Spectator here.
