This month, we’re spotlighting global regulators’ initiatives to combat misleading financial advice from social media influencers, aiming to better protect investors. We’re also calling on the Canadian Investment Regulatory Organization (CIRO) to enhance its complaints process, especially the response times, because no investor should have to wait months for a reply from their dealer. And don’t forget—our quick reader survey is still open! We’d love to hear your thoughts on our newsletter. | | Cracking Down on Finfluencers | | |
In June, we discussed how many do-it-yourself (DIY) investors turn to financial influencers—finfluencers—for investment advice. In that article, we highlighted a study that found most finfluencers give advice that either hurts investment returns or makes no difference at all.
Unfortunately, finfluencers who provide bad advice tend to have more followers and greater influence on retail investors than those who offer sound advice.
Recently, the International Organization of Securities Commissions (IOSCO) released a report called Finfluencers. It provides recommended regulatory actions, supervisory practices, and international cooperation strategies to address the risks posed by financial influencers and protect retail investors.
In addition, IOSCO shared tips to help investors, including:
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Avoid over-weighting large followings or high ratings – A finfluencer with many followers or high ratings is not necessarily competent or trustworthy. They may be paid to promote certain products.
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Do your due diligence – Pay attention to conflicts of interest, especially related to paid promotions, and do an Internet search to see if there are any lawsuits, complaints, or other concerns about the finfluencer.
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Think twice about non-personalized recommendations or advice – The advice finfluencers provide may not suit your individual financial situation. Obtain personalized advice from a licensed advisor.
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Be wary of emotional buttons – Do not allow yourself to be rushed into making bad decisions because of a sense of urgency or fear of missing out. Pressure to act quickly may indicate fraud.
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Be wary of promises of exceptional performance or steady returns with low risk – All investments carry some risk, and beating the market is very difficult to do. Past returns do not predict future performance.
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If you see something, say something – If you find a finfluencer you think may be misleading or deceiving their followers, report it to your local securities regulator.
The report also notes that social media platforms—by providing the infrastructure through which financial content is created, shared, and amplified—are key enablers of influencer activity. As such, IOSCO calls on them to take more responsibility for the financial content posted on their platforms.
| | FAIR Canada welcomes this important report, including urging platforms to take more responsibility. | | |
However, more needs to be done to protect investors in Canada. Notably, we’ve advocated that Canadian authorities be granted two essential tools that are currently being implemented in the United Kingdom (UK):
- In the UK, it’s a criminal offence to invite or encourage someone to invest unless the promotion is approved by a firm licensed by the Financial Conduct Authority (FCA), or an exemption applies.
- Also, proposed crime and policing legislation will, for the first time, empower law enforcement to apply to a court for orders to suspend or ‘take down’ domain names used in serious crimes, including major financial crimes that yield substantial illicit gains.
These new tools are designed to prevent unregulated individuals or entities from marketing risky or fraudulent investments to the public. They will form part of the FCA’s broader enforcement toolkit to combat online scams and protect retail investors.
We urge that similar tools be established in Canada and elsewhere. As investment advice increasingly shifts online, regulators and digital platforms must step up to protect investors.
| | Missing the Mark: CIRO’s Proposed Complaint-Handling Rules | | |
Timely complaint handling is an essential component of investor protection. When something goes wrong—whether it’s poor advice or unfair fees—investors need a fair and efficient way to resolve their complaint. A strong complaint-handling system not only helps protect investors from further harm, but also builds confidence in our financial markets.
Unfortunately, the latest proposal by the CIRO falls short of best practices and establishing a harmonized approach for resolving client complaints among dealers. FAIR Canada’s recent comment letter outlines our concerns and recommendations for how CIRO should and must enhance how dealers handle complaints.
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One significant problem is the timeline firms have to respond to complaints. CIRO plans to allow its members to take up to 90 days to provide their substantive response to the client. In addition, members who offer an internal “escalation” process can take an additional 30 days, or possibly longer, to issue a final decision from that review. In such cases, clients could be waiting 120 days or more for the firm to resolve a complaint to a client’s satisfaction.
| These timelines lag behind best practices in Canada and our international peer group. | | |
In addition to being from a bygone era, maintaining these long timelines will create a two-tiered system for dealers in Canada. As FAIR Canada has repeatedly noted, authorities in Quebec have introduced a shorter 60-day timeline for dealers to respond to a client’s complaint. The 60-day period covers the entire complaint process, including any internal escalation process.
The difference in the timelines for dealers operating in Quebec versus those operating outside is significant. In most circumstances, a dealer in Quebec must provide a final decision within 60 days, whereas a dealer outside Quebec could take 120 days or more.
Investors suffer when firms take more time to resolve complaints. Importantly, we’ve seen that when responses are delayed, some clients give up on their complaints or accept less than they deserve just to move on. This attrition problem came to light after the federal government introduced a shorter 56-day timeline for banks to address client complaints. With the introduction of shorter timelines, more clients escalated their complaints to an external ombud service for resolution. In short, longer timelines will benefit CIRO’s members but disadvantage their clients. CIRO needs to address this problem and require faster complaint resolution.
| | Investors deserve a faster, more straightforward process that aligns with best practices and resolves complaints fairly and without unnecessary delays. | | Internal Appeal Processes Confuse Investors | |
Another major issue is that firms’ internal appeal processes compete with the Ombudsman for Banking Services and Investments (OBSI)—Canada’s independent dispute resolution service. This process creates confusion because some investors may mistakenly assume they must go through the internal appeal process before contacting OBSI. This is not correct. Investors can bring their complaints to OBSI if their firm has not responded within 90 days of the complaint, or immediately after receiving a final response from the firm they find unsatisfactory.
While CIRO is proposing changes to help remove some confusion, we believe CIRO should simplify things by requiring firms to respond to complaints—including all internal escalation processes—within 60 days.
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Investors deserve a faster, more straightforward process that aligns with best practices and resolves complaints fairly and without unnecessary delays.
If CIRO is serious about protecting investors, it needs to do more.
As an agency with a public interest mandate, CIRO should go further with its complaint-handling proposal. It is also unclear why CIRO did not align it with best practices or create a single, harmonized timeline for all dealers, regardless of where they are based. After all, the push to consolidate the rules of the former Investment Industry Regulatory Organization of Canada and Mutual Fund Dealers Association is fundamentally about harmonizing requirements for CIRO members.
| | FAIR Canada Welcomes New Board Member | | |
We welcomed Brigitte Catellier, who was appointed as a director at our board meeting in May. Brigitte is a lawyer with 25 years of executive experience in regulated industries, including financial services. She serves as the Associate Director of the Osgoode Investor Protection Clinic and is a member of the Canadian Securities Administrators' Investor Advisory Panel.
Brigitte also teaches in Osgoode’s Financial Law LLM program, offering courses on the Regulation of Financial Institutions and Compliance in the Financial Services Sector.
| | New Ringtones Help Protect Seniors From Investment Scams | | Did You Share Your Opinion Yet? | | |
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| | Throughout the year, FAIR Canada (Canadian Foundation for the Advancement of Investor Rights) submits many comment letters on various important policy and regulatory matters that have an impact on investors. Read more about our investor advocacy work. | | |
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