CIRO, Wealthsimple warn about social media scams

The Canadian Investment Regulatory Organization (CIRO) is warning investors about fraudsters impersonating registered dealer firms on social media to run fraudulent schemes, including “pump-and-dump” scams.  

In a recent notice, the self-regulatory organization (SRO) reported that scammers have been posting ads on various social media platforms, encouraging investors to join what appear to be legitimate stock investing clubs. And it said these ads are being run from pages impersonating CIRO-regulated firms.  

“Fraudsters may claim to be regulated in Canada, and may add false disclaimers to make their ads appear legitimate,” reads the CIRO notice, issued June 4. “After responding to an ad, fraudsters typically direct investors to join a WhatsApp group, where they use high-pressure tactics to encourage victims to purchase specific stocks as part of a ‘ramp and dump’ scam,” a type of pump and dump. 

Although the regulator didn’t name any firms that have been impacted, Wealthsimple Inc.’s chief legal officer said imposters are posing as the firm on social media to run these schemes. 

“Recently, we’ve spotted imposters pretending to be Wealthsimple on social media,” Blair Wiley said in a LinkedIn post on June 4. “Scammers are using our logo to advertise stock picks with amazing short-term returns.” 

Wiley said these individuals are “luring Canadians into group chats where they use high-pressure tactics to push penny stocks, before dumping their own shares and crashing the price.” 

As scammers become more sophisticated, firms and regulators are looking to beef up investor protection efforts. For example, Wealthsimple built an AI-powered detection system to identify potential pump-and-dump scams and automatically warn clients who might be about to buy in, Wiley noted.  

As outlined in the CIRO notice, CIRO-registered firms may advertise on social media, but “self-directed brokers are prohibited from recommending specific stocks in ads, and all registered firms are prohibited from guaranteeing investment performance.” 

The regulator recommended investors use caution when responding to ads on social media and check whether an account running an ad appears to be impersonating a regulated firm.

Investors can consult the Canadian Securities Administrators’ National Registration Search to see if individuals or firms are registered to offer financial advice in Canada. And if a fraudster claims to work for CIRO or is posing as a firm that’s regulated by CIRO, individuals are asked to report it to CIRO. 

Investors who believe they’re a victim of a scam should immediately contact their bank, police, provincial securities commission and the Canadian Anti-Fraud Centre, CIRO advised. 

And, as Wiley warned in his post, “if you see an ad that looks too good to be true, it probably is.” 

These warnings come just weeks after CIRO reported that individuals were impersonating employees of the Investment Industry Regulatory Organization of Canada (IIROC), a predecessor of CIRO.

In a notice issued in May, the regulator said scammers were contacting investors by email or WhatsApp, claiming to be IIROC staff and to be able to help them with their investments.

“These individuals are not affiliated with IIROC or CIRO,” the SRO said at the time. “No CIRO employee will ever contact investors via WhatsApp, and all legitimate emails from CIRO employees will come from an email address ending in ‘@ciro.ca.'”