With the law on small investor protection the federal government has improved protection for investments in asset investments on the grey capital market. in 2015 this law among other things, introduced the obligation for issuers to provide a warning note with asset investments and to typographically emphasise this note. Before subscribing to an asset investment every investor must confirm with a signature that he or she has taken note of the warning. If subscription is done electronically, then the signature is replaced by the provision of individual data for identification. This regulation should contribute to ensuring that investors are consciously aware of the risks and the possibility of a total loss before deciding to invest in an asset investment.
Currently, the wording of the warning note and the process for electronic acknowledgement is stipulated by the legislator. The implementation of the typographical emphasis and the positioning of the warning note is up to the issuer of the asset investment. In practice, this leads to a wide variety of design variants for the warning note.
This study investigated the following questions:
- What effect do various design variants for the warning have on its visibility?
- Does the existing wording have the intended effect of making people aware of the risks of the assetinvestment?
- Is the existing process for electronic acknowledgement comparable to a signature in its effect?
The empirical research showed the following:
- A clear improvement in the visibility of the warning can be achieved predominantly through consistent positioning of the warning note. Here, positioning at the top of the first page underneath the title would be the best variant. Likewise, a consistent design for the asset investment information sheet (VIB) in the form of continuous text would improve visibility.
- Persons with poor financial knowledge would benefit most from better visibility of the warning note. This group of people demonstrated a particularly pronounced effect as a result of the warning. It led to more conservative investment behaviour. Independently from this, the study demonstrated that the existing wording of the warning generated a high level of willingness to deal carefully with the risks of asset investment in the participants in the study. Alternative wordings did not result in any significant increase in this willingness.
- The testing of various options for electronic acknowledgement showed that the existing procedure with entry of clearly identifiable data was considered to be slightly more meaningful than a personal signature. The highest importance was given to a procedure with a so-called media break, in which the confirmation needs to be printed out, signed and sent through the post. Overall, all forms of acknowledgement tested on small investors resulted in comparable levels of willingness to re-examine the risks of asset investment more thoroughly as well as in a comparable tendency to refrain from investing in an asset investment.