March 2025

This issue explores Fraud Prevention Month and how artificial intelligence (AI) is making scams more convincing, deceptive, and harder to detect. We’ll break down how fraudsters use AI to trick investors and share key insights to help you stay protected. Plus, big changes may be coming to investment disclosures in Canada! Regulators are testing a new, investor-friendly Fund Report designed to help make fund information clearer and more engaging. Read on to learn more…

Smarter Scams: How AI is Changing Investment Fraud

March is Fraud Prevention Month, a great time to learn how AI-powered scams can exploit unsuspecting investors.

AI has enabled a new wave of sophisticated fraud schemes. Research from the Ontario Securities Commission shows that AI has made scams more widespread, efficient, and difficult to detect.

AI-enhanced scams have also become riskier and more dangerous—victims invest 22% more in AI-enhanced scams than traditional ones.

The Canadian Anti-Fraud Centre (CAFC) reports a staggering $308.6 million lost to investment scams in 2022—the highest among all fraud types. With deepfakes and bots on the rise, that number could climb even higher.

Here are three common ways fraudsters use AI to lure investors:

Deepfakes

Deepfakes are AI-generated images, videos, or voice recordings that mimic a person’s look or voice. Scammers use them to impersonate loved ones, executives, or other trusted parties to steal money or personal information. One Ontario woman lost $750,000 after falling for a deepfake video of Elon Musk offering shares online.

Pump-and-Dump Schemes

In a pump-and-dump scheme, fraudsters spread false hype about a stock to drive up (pump) its price. Once it spikes, they sell their stock for a profit (dump), leaving regular investors with devalued or worthless shares.

AI has made this scam even more convincing. It’s used to generate fake news articles and social media posts. AI-powered bots also flood social media with fake comments about a stock, making it seem like everyone is buying in.

Spear Phishing

Phishing scams involve fake emails or messages that trick people into revealing personal information. The goal is to deceive consumers into providing sensitive data, such as login details, or downloading harmful software.

Spear phishing is even more dangerous. Scammers use AI to tailor their messages to specific individuals or organizations, posing as colleagues or trusted contacts. AI helps scammers improve grammar and fix spelling errors, making the phishing attempts even more convincing.

How to Protect Yourself

Spotting an investment scam requires vigilance and skepticism. Here are some steps you can take to protect yourself:

• Unsolicited messages: If someone offers you an investment out of the blue, be skeptical—even if they seem trustworthy.

• Urgent requests: Scammers often pressure you to act fast. Take your time before making any financial decision.

• Do your own research: Do background research before you invest, or speak with someone you know and trust about the opportunity. Be wary of social media posts and finfluencers promoting investment schemes.

• Check registration: Use the Canadian Securities Administrators’ (CSA) National Registration Search to confirm if a person or company is legitimate.

• Trust your gut: If something seems too good to be true, it probably is. 

For more information and tips about investment fraud, check out FAIR Canada’s “A Guide to Protect Yourself Against Investment Fraud.”

Is Investment Fund Disclosure Going to Get Easier to Read?

For years, Canadian securities regulators have focused on reducing perceived regulatory burdens on the industry. Now, they’re considering making things easier for investors too.

The Canadian Securities Administrators (CSA) are working on a new form of Fund Report for investment funds to replace the current Management Report of Fund Performance (MRFP). This latest version is designed to be clearer and more engaging, using behavioural science to improve how information is presented.

Behavioural Science Insights and Testing

The CSA worked with the Behavioural Insights Team (BIT), a global research and innovation consultancy, to create a better Fund Report. Here’s what they did:

• Reviewed behavioural science research to understand best practices in presenting information to retail investors.

• Surveyed investors regarding their preferences, needs, and challenges.

• Synthesized obstacles to investors using and understanding MRFPs and ideas that could help.

• Developed multiple templates based on its research and principles of behavioural economics.

• Ran an investor test to see if investors could use and understand the new Fund Report designs. Then, BIT identified a preferred template and ways to make the document more useful and easier to read.

More Canadians are investing without an advisor. The regulatory system assumes that investors read and understand public disclosure documents, including financial reports, such as the MRFP. But many investors don’t read or understand these reports. The new approach acknowledges the importance of having reliable sources of information that are easier to read and more engaging for investors.

The proposed Fund Report and associated regulatory changes are not yet in place. If you want to learn more about this, you can read:

• FAIR Canada’s Comment Letter: Our submission is available here.
• BIT’s Research Report: The report is available here.

Regulators Test Digital Tools to Streamline Investor Onboarding

Provincial securities regulators are testing new digital tools to help investors securely share their financial information. This project will simplify transferring customer data between firms, making it easier for investors to open new accounts and switch firms. Giving investors more control over their data will empower them and promote competition.

The regulators’ initial focus is electronic know-your-client (e-KYC) processes and data sharing. They are assessing the potential benefits, regulatory challenges, privacy concerns, and technical standards. To gather feedback, they’ve released a consultation paper on how data sharing could simplify client onboarding while ensuring investor protection. Learn more about this in the Investment Executive article here.

FAIR Canada Welcomes New Board Member

We welcomed Jean Lorrain, who was appointed as a director at our board meeting in February. Jean is a Montreal-based consultant. He became chair of the Toronto Centre’s Securities Advisory Board in 2020. Previously, he held various leadership positions at the Québec Autorité des marchés financiers and participated in numerous Canadian and international capital market-related committees for more than 32 years. In addition, he has lectured on business and corporate law and currently teaches global securities regulation at the University of Montreal.

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.

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