The perception of Maltese investors on the financial regulatory framework

Abstract

This dissertation analysis how investors perceive three different aspects of the financial regulatory framework: investor protection, disclosure and investor compensation schemes. This study also assesses whether investors’ perceptions and practitioners’ perceptions are in line with each other. The research methodology was based on the triangulation approach: a desk study to obtain a good understanding of the subject and to assist in the formation of the theoretical framework, questionnaires to local investors and interviews with a regulator, a fund manager and a financial adviser. The key findings suggest that there are misconceptions regarding retail investors’ perception of investor protection. When it comes to disclosure requirements, although investors think it is very important that material information is disclosed, unfortunately this is taken very lightly since the majority of them do not look at disclosed information before investing. When it comes to investor compensation schemes, investors are aware of them, but at times they misinterpret their features. As one could see in this dissertation retail investors are not a homogeneous group of investors. At the end of this dissertation I concluded that there are inconsistencies regarding what the investors’ perceptions on the financial regulatory framework really are. It is good to point out that retail investors’ financial literacy is underestimated, and fear and greed play an important part in investors’ decisions. Following such results a series of recommendations were drawn up and in the hope that they will lead to further local research on the subject matter.