The legal framework for financial advertising: curbing behavioural exploitation

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Policy makers and behavioural finance scholars express growing concern that marketing practices by financial institutions exploit retail investors’ behavioural biases. Investor protection regulation should thus address these marketing practices and include mechanisms curbing behavioural exploitation. That raises the question whether the marketing communications regime of the new Markets in Financial Instruments Directive can live up to this demand. This article develops a regulatory model that integrates behavioural finance insights into the new marketing communications regime. It then determines how regulatory authorities can apply this model when they interpret and apply specific regulatory requirements. It demonstrates how a regulatory authority or a court can translate empirical behavioural finance research findings into legal arguments when assessing whether marketing practices can significantly distort a model investor’s decision-making process. The article further establishes that the detailed requirements imposed on investment firms by the new Markets in Financial Instruments Directive are necessary in order to protect investors from behavioural exploitation. Finally, the article submits policy proposals that aim to protect investors more effectively from behavioural exploitation.
Original languageEnglish
Pages (from-to)853–882
Number of pages30
JournalEuropean Business Organization Law Review
Issue number4
Early online date22 May 2018
Publication statusPublished - 1 Dec 2018

Bibliographical note

© The Author(s) 2018. This article is distributed under the terms of the Creative Commons Attribution 4.0 International License (, which permits unrestricted use, distribution, and reproduction in any medium, provided you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license, and indicate if changes were made.


  • advertising
  • marketing
  • behavioural finance
  • behavioural exploitation
  • MiFID II
  • investor protection


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