Regulator reports surge in calls about do-it-yourself investing platforms amid retail frenzy
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Last October, the industry regulator noted a surge in calls and complaints of 180 per cent compared to the March to October period in 2019.
Older Canadians represent a significant number of the calls about DIY investing, according to the IIROC spokesperson. Since 2017, more than half of the calls — 57 per cent — have come from those over age 55.
Direct access investing is giving more power to main street investors, with loosely associated groups having access to enough capital to move markets, Maureen Jensen, former chair of the Ontario Securities Commission, told the Post last week. She cautioned that this is also taking some trading activity outside the system where there is regulatory oversight.
Against this backdrop, market regulators are scrambling to adjust. The British Columbia Securities Commission, for example, is hoping to propose new rules by this summer that would compel people to disclose potential conflicts of interest, such as whether they have a short or long position in any stock they are promoting on social media.
In a joint statement last week, IIROC and the umbrella group for Canada’s provincial securities watchdogs issued a joint statement in which they said they are monitoring the recent trading volatility and what’s driving it, and pledged to take “appropriate regulatory action to protect investors” if they find “abusive or manipulative trading activity.”
Even when do-it-yourself investing falls within the purview of market regulators, its development has not been without controversy.
According to multiple media reports in the United States, Robinhood was sued this week by the family of a 20-year-old client, who committed suicide after thinking he had accrued more than $730,000 in losses on the platform through trading options.
The lawsuit alleges that his attempts to contact the company about his apparent balance were unsuccessful and that he received only automated replies. It turned out his losses were substantially smaller than he thought, as they were offset by other investments, according the reports. None of the allegations have been proven.
