Seventy-five percent of U.S. investors believe that questionable accounting practices are hurting the current investment climate, according to the September UBS/Gallup Index of Investor Optimism poll. Although this percentage is down slightly from levels of 80% or more over the past couple of years, it suggests that many investors remain extremely concerned about how much they can trust corporate America, the equity markets, and the federal regulators who supervise them.
To gain insight into what can be done to bolster investor confidence in the equity markets, Gallup asked investors earlier this year about what is important to them when they invest in the U.S. equity markets and how they think those markets should work. In particular, Gallup asked investors questions pertaining to the various possible changes the Securities and Exchange Commission (SEC) is considering as part of its proposal to modernize the regulatory structure of the equity markets (Regulation NMS). However, that regulatory proposal was never directly mentioned in the survey.
Investors Agree on What Is Important
Most investors say the following aspects of the equity markets are important to them when they invest:
- Ninety-eight percent say being able to "buy or sell whenever they want" is important when they buy or sell stocks.
- Ninety-seven percent say getting the "best possible price" is important when they buy or sell stocks.
- Ninety-seven percent say getting the "exact price quoted" is important when they buy or sell stocks.
- Ninety-seven percent say getting their "purchase or sale completed quickly" is important when they buy or sell stocks.
However, Investors Are Split on Some Issues
Of course, investors are much less in agreement about how the regulators should handle several key issues:
- Fifty-three percent of investors say all equity markets should be available to all investors, while 22% say the regulators should limit retail investor access to some markets.
- Forty-seven percent would let their stockbrokers decide how their purchase orders are processed, while 45% would prefer to decide themselves.
- Forty-seven percent say that the regulators should set a ceiling on fees, while 42% say fees should be left solely to the marketplace.
Investors Want Modernizing Reforms
Not surprisingly, Wall Street firms are split over the modernization proposals the SEC has put forth, and many argue that the issues involved are simply too complex for the average investor to evaluate on an informed basis. Looking at the SEC's Regulation NMS discussion, most investors might agree.
Regardless, it seems clear that what investors want -- and need -- from the federal regulators is simple and straightforward: information and transparency about how their investment orders are handled.
- Seventy-nine percent of investors say that the market regulators should promote information transparency for investors.
- Seventy-six percent say that they should be told when their orders are being matched internally at a brokerage before they are executed.
*Gallup surveyed 1,010 "investors" using Gallup's standard definition of the "investor," which is individuals having $10,000 or more of investable assets and representing approximately 40% of the U.S. population. For results based on this total sample of investors, one can say with 95% confidence that the margin of sampling error is ±3 percentage points. Gallup wishes to thank Ameritrade Holding Corporation for its financial support in conducting this survey. However, the opinions expressed in this report concerning the findings of this special survey are those of the author and do not necessarily reflect the views of Ameritrade or any other firm operating in the U.S. equity markets.
