October 2024

This month’s newsletter highlights FAIR Canada’s new survey on do-it-yourself (DIY) investors. The survey offers fresh insights into their reasons and methods for managing their own investments. It compares investors who invest entirely on their own with those who also use an investment advisor. Additionally, we examine whether settlement agreements should allow your advisor to stop you from reporting misconduct. Discover these topics and more…

Inside the Minds of DIY Investors: Our Survey Reveals Fresh Insights

One of the core strategic priorities identified in our 2023 -2028 Strategic Plan is to conduct and share research that provides deeper perspectives directly from individual investors about key policy matters that have an impact on them. As part of this effort, FAIR Canada commissioned an in-depth study on DIY investors—a fast-growing trend that is here to stay.

DIY investing is on the rise, raising questions about how the regulatory system should adapt. In 2020, Canadians opened more than two million DIY investment accounts. By September 2023, DIY accounts had surged to 11.4 million, marking a 470% increase over three years. 

Our survey builds on research work done by regulators into DIY investing to better understand this phenomenon. This includes a survey released in 2021 by the Ontario Securities Commission (OSC), and two reports published by the British Columbia Securities Commission, including a report in 2022, and most recently a report in April 2024.

Recently, FAIR Canada released a comprehensive study of 1,350 investors across Canada, focusing on the differences and similarities between DIY-only investors who are exclusively self-managed, and ‘hybrid’ investors who also work with an advisor. 

The survey covers the following topics:

• Reliance on investment-related tools on DIY platforms
• Using leverage and margin to buy investments
• Trading in derivatives
• Confidence in investing
• The ease of opening a DIY account

Some key differences emerged when comparing DIY-only investors with hybrid investors, challenging common assumptions about DIY-only investors. For instance, DIY-only investors have less risk tolerance and confidence, and are less likely to use the tools available on their DIY platforms compared to hybrid investors who also work with an advisor. Additionally, DIY-only investors (43%) are less likely than hybrid investors (52%) to agree that the investing process is fair to the average investor. 

The survey also identified four distinct DIY investor profiles based on shared attributes:

Significant differences exist between each profile in confidence levels, risk appetite, enjoyment from DIY investing, frequency of monitoring their investments, and more. 

The report underscores the need to review how we regulate DIY platforms. Regulators are now looking at how DIY platforms can be improved to offer non-tailored advice to investors. Regulators could consider offering some advisor-like features to help DIY investors make better choices, such as warnings for complex products and practices (e.g., trading on margin). The findings also support the need to provide more straightforward account information and improved disclosure of the risks, fees, and potential conflicts.

For further insights, read our report called Understanding Do-It-Yourself Account Holders and stay tuned for more of FAIR Canada’s research on retail investors! 

Are you thinking about becoming a DIY Investor?

If so, assess your investment knowledge and determine whether you have the time to research and manage your investments on your own.

To learn more, check out the following resources:

• FAIR Canada – DIY Investing

• Ombudsman for Banking Services and Investments – Consumer Bulletin: Be Aware of the Risks of DIY Investing

• Autorité des marchés financiers – Investing on Your Own in the Stock Market

• New Brunswick’s Financial and Consumer Services Commission – Self-Directed Investing

Can Your Investment Dealer Prevent You From Reporting Their Misconduct to Regulators?

Should your investment advisor be allowed to use a settlement agreement to stop you from reporting their misconduct to regulators? In the U.S., the Securities and Exchange Commission (SEC) says no.

In early September, the SEC announced that it had settled charges against a broker-dealer and two affiliated investment advisors. These companies had prevented their clients from reporting the firm’s misconduct to regulators as part of their settlement agreement. The broker-dealer and its affiliated advisors entered into 11 settlement agreements that compensated the clients for losses caused, but prohibited them from communicating with the SEC unless it started an inquiry.

The firms also required some clients to confirm that they had not reported the misconduct to the SEC and to agree that they would not do so in the future.

The SEC determined that the settlement agreements violated U.S. federal securities laws. The firms settled the charges without admitting or denying the SEC’s findings, paying a total of US$240,000 in civil penalties.

What are the rules for investment dealers in Canada?

In Canada, investment dealers can sell all types of investment products, while mutual fund dealers specialize in selling mutual funds. Both types of dealers are regulated by the Canadian Investment Regulatory Organization (CIRO).

Based on guidance provided by CIRO’s predecessor, the Investment Industry Regulatory Organization of Canada (IIROC), CIRO rules indicate dealers cannot make settlement agreements that:

• Prevent clients from informing regulators, CIRO (formerly IIROC), or law enforcement agencies about the settlement.

• Stop clients from filing a complaint against the dealer.

How can you protect yourself?

• If you enter a settlement agreement with an investment dealer or mutual fund dealer, consider getting legal advice before signing it to protect your interests.

• If you think you have entered into an agreement violating CIRO’s rules, seek legal advice immediately.

• If you live in Ontario and are looking for free legal advice, you can contact the following investor protection clinics:

Osgoode Hall Law School – Investor Protection Clinic

University of Toronto Faculty of Law – Investor Protection Clinic

What’s New

ScamShield: Investor Protection Challenge

The Alberta Securities Commission (ASC) is offering people across the globe a chance to make a real impact in the fight against online crypto investment scams. The ASC continues to expose how fraudsters are using technology and psychological tricks to deceive investors. To address this growing issue, the ASC launched ScamShield—a competition to help protect investors from crypto fraud. The competition is looking for bold, innovative solutions to detect scams, prevent victims of fraud, and educate investors.



With a potential prize of up to $130,000, this is an opportunity you won’t want to miss. You must submit your entry by November 4, 2024.

Learn more about the competition here.

OSC Experiment Studies Role of Artificial Intelligence in Retail Investing

The OSC conducted an interesting behavioural science experiment to explore how artificial intelligence (AI) can help individual investors make decisions. Participants were given $20,000 in virtual funds in an investment simulation and received investment advice from either a human advisor, an AI tool, or a combination of both. While participants were most likely to follow the advice of the blended human-AI source, the difference was minimal compared to the other options. There was no clear preference between advice from a human or solely from an AI tool. Although this suggests Canadian investors might be open to AI-based advice, protecting investor interests remains a priority. Learn more about this dynamic study here.

In the same report, the OSC shared research that shows AI-driven scams are more dangerous than traditional ones, as AI can spread fraud quickly and create deepfake videos or cloned voices to trick investors. In a simulation, people invested 22% more in AI-enhanced scams compared to regular scams. The experiment also looked for solutions to protect investors from AI-driven scams. To gain further insights, read more.

Throughout the year, FAIR Canada submits many comment letters on various important policy and regulatory matters that have an impact on investors. Read more about our investor advocacy work.

We’d Love to Hear From You!

Do you have feedback on our newsletter or suggestions for topics you’d like us to write about? Your input is valuable and will help us improve our newsletter content for loyal subscribers like you. Please email us at info@faircanada.ca with your comments and/or suggestions.

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To learn more about our advocacy for investors, visit FAIRCanada.ca