Australia's disclosure regime has 'inherent weaknesses': ASIC Australian Securities and Investments Commission chairman Greg Medcraft ... says wholesale and retail investors have "lost a lot of money" on complex instruments since 2008. The corporate regulator has admitted that Australia's disclosure regime has "inherent weaknesses" that failed to prevent investors losing "a lot of money" on complex financial products. It is considering requiring investors to prove they have a basic level of understanding before they can invest in such products. Complex products, due to their nature, can be difficult for investors to understand. This can lead to them being mis-sold, particularly when investors are searching for yield Australian Securities and Investments Commission chairman Greg Medcraft said wholesale and retail investors have "lost a lot of money" on complex instruments since 2008. These products include financial derivatives such as "collateralised debt obligations (CDOs) " and "CDOs squared." "Wholesale and retail investors were unable to understand or value the risks inherent in these products," Mr Medcraft said. This can lead to them being mis-sold, particularly when investors are searching for yield. Speaking at the ASIC annual forum in Sydney, Mr Medcraft said the agency was considering ways to best regulate such products. This included requiring investors to prove they understand how such products work before they can invest in them. "For example, e-learning modules which explain the key features and risks of a product could be used to educate potential investors about a product," he said. This could overcome the inherent weaknesses in traditional disclosure methods. An online assessment model could then be used to assess the person's understanding before they invest. ASIC has been heavily criticised in recent years for allowing complex financial instruments, such as CDOs, to be sold to unsophisticated investors. In November, the Federal Court found in favour of 13 NSW councils in relation to the sale of complex financial instruments widely criticised for their role in the financial crisis. The councils were awarded more than $20.2 million in compensation and legal costs after the court found they were misled by S&P ratings agency, ABN Amro Bank and Local Government Financial Services about products nicknamed "Rembrandt notes" in the lead-up to the financial crisis.