T

he financial consumer protection department of the Financial Services Authority (OJK) has received almost 3,600 complaints about the services and products of finance and investment companies in the first 18 weeks of this year alone.

 This again makes it most imperative and urgent for the OJK consumer financial protection department to step up its nationwide campaign to educate financial customers, improving their financial literacy or their understanding of financial products, their financial risks and opportunities.

Equally important is that the OJK pushes investment and financial companies to improve the way they design and sell products to ensure the products have merit and are offered to customers for whom they are designed.

Amid increasingly keen market competition, there are big risks that the salespersons of financial companies, notably insurance firms, often resort to misspelling, resulting in poor consumer choices.

Simply ensuring that people are provided with complete and accurate information and that the right kinds of products are sold to the right kinds of investors seems no longer sufficient to prevent fraudulent products from entering the financial market.

Faced with complex decisions or too much information, investors often make decisions contrary to their own interests due to their aversion to losses or their unwillingness to drop a losing strategy. Sometimes they hide behind credit rating agencies. This is where stronger regulations are needed.

The notion that a marketplace is best regulated by cautious individual buyers is now a largely obsolete doctrine. In fact, the financial consumer protection department was set up to protect the little guy from predatory financial firms.

The cases of bogus investment products uncovered over the past few years also called for better cooperation and coordination between the OJK and the Trade Ministry because many of the investment instruments sold were tied to commodity futures trading operations.

Commodity trading, including futures exchanges and other products and services outside the financial service industry, lie under the jurisdiction of the Trade Ministry, which oversees the Consumer Protection Agency.

The combination of poor consumer financial protection '€” caused by incompetent financial service oversight '€” and the low financial literacy of bank customers and retail investors, seemed to make it widely possible for Ponzie-type investment schemes to operate for several years before being detected by regulatory agencies.

Therefore, in a complex and sophisticated industry such as finance, a strong regulator is essential to ensuring that market players are telling the truth. As the financial services industry becomes increasingly sophisticated with numerous derivatives, a special law, like that in the US, will be required to protect financial consumers from fraudulent services and products.