Here are the key issues to consider:
Confusing Account-Opening Information and Documents
OEO dealer account-opening documents are often long, legalistic, and hard to understand. Many investors struggle to understand complex financial language. We recommend clients receive clear, plain language information in all documents.
Inadequate Appropriateness Obligation
OEO dealers must determine whether it is appropriate for an investor to open a DIY account. However, opening a DIY account is inappropriate only if:
- The person lacks the skills to conduct online activities.
- The person seeks investment advice.
This oversimplifies real investor needs. We suggest potential clients must complete an investor knowledge quiz before opening a DIY account, especially higher-risk accounts (e.g., margin accounts or more complex products). The quiz would help ensure clients understand basic investing concepts and promote better financial outcomes.
Risky Digital Engagement Practices
Digital engagement practices (DEPs), such as top-traded lists and copy trading, can affect investor behaviour and lead to poor outcomes. We suggest that CIRO:
- Prohibit OEO dealers from using DEPs that have been shown to harm investors.
- Provide DEP guidance focusing on areas of concern, conflicts of interest, and positive uses of DEPs to benefit investors.
Overall, FAIR Canada is calling for improved oversight and clearer rules to support DIY investors and ensure they are better protected. We also urge CIRO to look more broadly at OEO platforms to deepen their understanding of the full online investor experience.
You can review our response to CIRO’s consultation for more information.
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