Regulators Seek Ways to Tackle Rise in Online Securities Fraud: Report

TORONTO — The increase in online marketing and distribution of stocks and other securities is creating more potential for fraud and new challenges for regulators, according to a new report.

TORONTO — The increase in online marketing and distribution of stocks and other securities is creating more potential for fraud and new challenges for regulators, according to a new report.

The report released Monday by the International Organization of Securities Commissions, of which several Canadian provincial regulators are members, indicates that the risks are particularly high for leveraged securities products that are not traded on major exchanges. .

The companies that sell these retail options, known as over-the-counter products, use social media, influencers and email to promote the securities, while also using internet trading platforms to sell and distribute them. note the report.

The report came the same day the Canadian Securities Administrators issued a new warning about fraudulent websites seeking to invest in forex and crypto assets, often promoted through emails and social media.

Regulators have a hard time detecting even some of this activity because it is often targeted at specific users, and therefore not necessarily publicly visible, the report notes. The sheer volume of information published online is also a problem, as is the cross-border nature of many authors.

Canadian regulators have successfully risen to the challenge, including in Quebec and British Columbia using sting operations to impersonate investors and attend webinars in secret, while the Securities Commission of Ontario is known for successfully working with internet service providers to root out fraudulent scams. sites.

Grant Vingoe, chief executive of the OSC, said in an interview that the regulator is stepping up its oversight and enforcement online and on social media, but often relies on investors who come forward to file complaints.

He said that while social media has provided opportunities to share all kinds of legitimate investor information, it also requires a degree of caution.

“Social media has amplified and increased the volume of fraudulent solicitations by people who just want to separate Canadians from their money, and in some cases are completely illegitimate.”

In the case of influencers, Vingoe said the Ontario regulator has been working more so far to notify users of disclosures and other requirements, but enforcement is a possibility.

“There’s a fine line between free speech, commercial free speech and illegal statements on social media, so most of our efforts have been about telling people what the standards are.”

The report released on Monday proposes that regulators be more proactive with their technology-based detection capabilities, potentially seek more enforcement powers to take action against websites, and increase international data sharing.

This report from The Canadian Press was first published on January 17, 2022.

Ian Bickis, The Canadian Press

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