The average investor reeling in the aftermath of economic chaos is looking for enforcements and harsh punishments, not new regulatory structures, to fend off a repeat event.
In polling 1,000 household investors in late August and early September, the Center for Audit Quality determined investors generally trust themselves more than regulators, auditors, or anyone else to watch out for their interests. They’re expecting enforcement offices to track down and punish misdeeds that may have led to the economic meltdown—and they consider enforcement more important than regulatory action to minimize the likelihood of a similar calamity in the future.
CAQ Executive Director Cindy Fornelli said investors demonstrated “surprising resilience” in the 2009 survey, with confidence leveling off this year after a significant, 14-percentage point decline in 2008. “It indicates the stabilization we’ve seen in the past year mirrors positive economic moves,” Fornelli said. “It reflects the resilience of investors, particularly as the market has remained volatile.”
As Congress and other policymakers in the Obama administration consider changes to the existing regulatory structure in response to economic events, they need to pay attention to what individual investors are thinking, said Fornelli. Nearly half, or 44 percent, said capital markets need tougher enforcement of existing regulations while only 22 percent said the markets need a new rulebook for financial regulation. Another 18 percent said policymakers should change nothing in the regulatory or enforcement framework, and 10 percent said markets need less regulation as a result of recent events.
Seventy percent of investors said they have at least some confidence in audited financial information released by publicly traded companies, representing a slight decline from 73 percent the year before. When asked who, besides themselves, adequately protects investor interests, auditors outranked regulators, brokers, analysts, and journalists alike.
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