Recent report warned of the risks to retail investors of digital expansion
Canadian securities industry regulators have joined international counterparts in focusing on the risks posed by rogue unregulated advisors who provide financial advice and recommendations online.
The rapid growth of the ‘finfluencer’ community on digital platforms was recently highlighted by IOSCO as a risk to retail investors, although a report from Tangerine showed there is some good that has come from these online sources such as encouraging positive savings and budgeting behaviours.
IOSCO’s several reports warn that technological transformations creates new opportunities but could also blur the lines between the provision of authorized and regulated financial advice and the provision of general financial information, creating further risks for retail investors.
“The digital transformation of financial markets has reshaped the way retail investors interact with financial products and services. The Good Practices outlined in the three reports provide IOSCO members with a framework to address the challenges while maintaining the benefits of innovation,” said Derville Rowland, Chair of the Retail Investor Coordination Group.
In working as part of a ‘Global Week of Action Against Unlawful Finfluencers’, the OSC was one of the regulators who teamed up with law enforcement and others for action including issuing warnings to those who were deemed to be breaching rules or potentially harming investors.
But there was also more positive engagement with 87 finfluencers and 9 issuers that hired finfluencers for stock promotions reviewed by the OSC during the exercise.
There was a spectrum in the quality and accuracy of information shared by finfluencers, with some providing investment advice without appropriate registration. Several finfluencers were found to have provided misleading information – particularly in the crypto space – among other issues.
International relationships are vital in countering this growing issue, and we are pleased to have played an important part in disrupting harmful finfluencer activity,” said Bonnie Lysyk, Executive Vice President, Enforcement at the OSC. “The OSC’s recent research highlights the substantial influence social media personalities have on investor behaviour, underscoring the need for proactive intervention to protect investors.”
Also involved in the week was the Autorité des marchés financiers (AMF) whose investigations team contacted a long list of Québec influencers representing a combined audience of over one million followers in order to raise their awareness, caution them or ask them to remove content from their posts.
"Most finfluencers are acting within the framework of the law. Some, however, are touting products or services without being registered with the regulators. Others are making false promises of a lavish lifestyle or easy profits," said Éric Jacob, Executive Director, AMF Enforcement. "By joining forces with other regulators in Canada and globally, we clearly affirm our commitment to raising public awareness and combatting illegal conduct that puts consumers' finances at risk."
Regulators in Alberta and BC were also part of the Canadian participation in the week.
