FAIR Focus

This month's newsletter discusses regulators clamping down on misleading social media “finfluencers” who promote investing and financial products to investors. We discuss growing concerns over borrowing money to pay for investments and some of the risks that come with this approach to investing. In addition, we highlight steps Canadian regulators are taking to try to protect crypto investors, as well as investors falling prey to “affinity” scams.  



In June 2021, reality TV star Kim Kardashian promoted the EthereumMax cryptocurrency on Instagram to her more than 250 million followers. The Chair of the U.K.’s Financial Conduct Authority said the post “may have been the financial promotion with the single biggest audience reach in history.”

Despite Ms. Kardashian’s ringing endorsement, not everyone was happy with their purchase of EthereumMax. In a class action lawsuit, investors claim the influencer and other celebrities made false statements about the cryptocurrency through social media, which led to investment losses.

In addition, Ms. Kardashian found herself in hot water with the U.S. Securities and Exchange Commission (SEC). The SEC fined her $1.26 million for failing to disclose that she was paid to endorse EthereumMax. As the SEC Chair stated, “this case is a reminder that, when celebrities or influencers endorse investment opportunities, including crypto asset securities, it doesn’t mean that those investment products are right for all investors.”

The North American Securities Administrators Association (NASAA) recently issued an advisory warning investors about finfluencers. NASAA explained that finfluencers post entertaining, hyper-emotional investment endorsements, but many are not licensed financial professionals. They may also fail to mention they’re being paid to promote an investment opportunity.

The British Columbia Securities Commission (BCSC) has proposed new rules on investment promotions that would apply to finfluencers. Under the rules, anyone promoting companies with connections to B.C. would have to disclose any compensation they’re receiving, whether they own securities in the company, and other facts that could affect their objectivity. The Ontario Securities Commission has indicated that it is considering similar rules.

Although B.C.’s proposed rules are not yet in effect, the BCSC is examining social media posts under existing rules. In September 2022, the BCSC settled with three companies for violating the requirement to disclose that finfluencer promotional posts were issued on behalf of the companies.

Regulatory initiatives targeting finfluencers are a welcome development, but it’s also important to take steps to protect yourself.

NASAA provides some helpful tips to help you assess advice from finfluencers:

The next time you see a financial product endorsement, from a celebrity or otherwise, approach it with caution and do your research.

Fuelled by low interest rates, Canadians borrowed a record amount during the pandemic to invest in stocks and other financial products. Borrowing to invest may be a good strategy, but only when your investment increases in value. This is beneficial because you can invest more than you otherwise would have been able to. Assuming the markets are going up, the increase in your return is usually more than enough to cover the interest you will be charged.

In August, the Canadian Securities Administrators (CSA) announced that crypto trading platforms applying to become registered with Canadian securities regulators must commit to do certain things, pending approval. These commitments, known as “pre-registration undertakings”, require these crypto platforms to operate in a way that addresses investor protection concerns, similar to the rules for platforms that have already been registered.

Examples include commitments to:

Platforms that fail to comply with these commitments may face enforcement action from the regulators. The commitments are a welcome step. They provide a needed layer of protection for investors who are engaging with these platforms before they are fully registered.

If you are investing using a crypto-trading platform, you can check the CSA’s website to see whether it is already registered in Canada.

In January, the Ontario Securities Commission (OSC) announced that the Pakistani-Canadian community was targeted with a fraudulent investment scheme exploiting shared cultural heritage. The fraudster was accused of allegedly taking about $2 million, on the pretense of investing the funds and to generate returns for community members. Some people borrowed money to invest in the scheme by using their homes as collateral, or getting loans from family members.

In another case, the OSC announced that an individual who spoke Telegu solicited members in the Telugu-speaking community, promising them investment lessons and trading on their behalf. In this case, some members even shared confidential account log-in details, which the accused used to access their funds directly. 

October is Investor Education Month. Be sure to check out your local financial regulator’s website, social media channels, and newsletters to learn more about investing. They may also provide free online events about investing basics and how to avoid fraud.

The first week of October is also World Investor Week (WIW), a global campaign aimed at raising awareness on the importance of investor education and protection. As part of the WIW kick-off events, FAIR Canada’s Executive Director, Jean-Paul Bureaud, was the keynote speaker at an event organized by the World Bank and hosted by the Bangladesh Securities and Exchange Commission. Jean-Paul discussed FAIR Canada’s advocacy in support of investor resilience and sustainable investing. He also spoke about FAIR Canada as a potential model for investor advocacy in other countries.

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