Investor protection in the age of finfluencers: Guidance from Canadian Securities Regulators

The Canadian Securities Administrators (CSA) and the Canadian Investment Regulatory Organization of Canada (CIRO) recently released Joint Staff Notice 31-369 (the Staff Notice). The Staff Notice provides guidance on how Canadian securities laws apply to the activities of social media financial influencers, commonly referred to as “finfluencers.”

How securities laws apply to finfluencers

The growth of finfluencer activity has raised significant investor protection concerns, particularly where online content blurs the line between education, promotion and investment advice. The Staff Notice addresses these concerns by reaffirming that Canadian securities laws are principles‑based and sufficiently flexible to apply to new and evolving methods of delivering investment‑related content, regardless of the technology used.

As a result, securities laws may apply to finfluencer activity whether it occurs through social media, videos, text messages, traditional media or other channels and whether content is created by a human or by a computer‑generated digital avatar. The same principles apply to the use of artificial intelligence in creating or disseminating investment‑related content.

Registration and disclosure requirements

At the core of investor protection is the requirement that anyone in the business of advising on or trading in securities must be registered, unless an exemption applies.

“Advising” includes recommending or expressing an opinion about investing in a security and may extend to promotional statements or content that could reasonably be viewed as encouraging an investment. By contrast, providing general, factual information about how markets operate or basic investing concepts, without opinions or recommendations, is not typically considered “advising.”

“Trading” is defined broadly and includes not only executing trades, but also activities carried out in furtherance of a trade, such as advertising, solicitation or facilitating transactions. Where advising or trading activity is carried out for a business purpose, registration is generally required. Whether this threshold is met is determined based on the specific facts, including the regularity of the activity, any solicitation of others, the extent to which the conduct resembles that of a registrant and whether compensation is expected. Disclaimers stating that content is “not advice” do not, on their own, avoid registration requirements.

Securities laws provide limited exemptions from registration. Of potential relevance to finfluencers is the general advice exemption, which may apply where advice is not tailored to an individual’s circumstances. This exemption requires clear disclosure of any financial or other interest in the securities discussed and does not apply to trading activity or acts undertaken in furtherance of a trade. If someone intends to engage in advising or trading for a business purpose and does not qualify under an available exemption, they must register as an adviser or dealer. Registered firms and individuals must meet the applicable proficiency, integrity and solvency requirements and must comply with ongoing conduct obligations.

Where a finfluencer is retained to promote securities – or relies on the general advice exemption while having a financial or other interest – that interest must be clearly and conspicuously disclosed. Disclosure must be specific and prominent and must explain the nature of the compensation or relationship, identify the security involved and state who is paying and receiving the benefit. Generic disclosures or disclosures that are buried, delayed or difficult to locate, such as those placed at the end of a post or behind additional clicks, are not sufficient.

Misrepresentation and market manipulation risks

If the general advice exemption applies, a finfluencer may not be required to register as an adviser under securities laws. However, this does not insulate them from other regulatory obligations. Their conduct may still engage prohibitions relating to misrepresentations, market manipulation or other marketing-type activities. It is important to note that CSA members retain the authority to intervene where conduct is considered contrary to the public interest.

A misrepresentation may arise from statements that are false, misleading or create a misleading impression for a reasonable investor, regardless of intent. Securities laws also prohibit manipulative or deceptive conduct, including activities that artificially influence market price or trading activity like so‑called pump‑and‑dump schemes.

Risks for registrants and issuers engaging finfluencers

Registered firms and issuers that engage finfluencers remain responsible for compliance with securities laws.

For registrants, finfluencer arrangements may trigger referral arrangement, marketing, advertising and conflict of interest issues. Firms may also be held accountable for statements made on their behalf. Issuers face similar risks, as finfluencer activity may constitute investor relations or promotional activity, making the issuer responsible for compliance with applicable securities laws and stock exchange policies.

In both cases, regulators expect written agreements, appropriate training and oversight, clear disclosure of compensation and ongoing monitoring. These measures are intended to ensure finfluencer content complies with securities laws and does not mislead investors or distort market activity.

Key takeaways

Finfluencer activity has become an increasingly prominent channel for the dissemination of investment‑related information, prompting heightened regulatory scrutiny. As the Staff Notice makes clear, Canadian securities laws are deliberately principles‑based and flexible, allowing regulators to focus on the substance and impact of conduct rather than the platform, format or technology used.

As a result, finfluencer activity – whether delivered through social media, traditional media or emerging technologies such as artificial intelligence – may engage securities law obligations. These obligations may include registration, disclosure and other conduct requirements. Securities regulators have indicated that they are actively monitoring this area, and failure to comply can carry serious consequences.

The MLT Aikins Corporate Finance and Securities team holds a wealth of knowledge that includes initial and secondary public offerings of securities, debt and equity restructurings, private placements, rights offerings, takeover bids and mergers and acquisitions. We have experience assisting enterprises – from start-ups to publicly-traded international corporations – in a wide range of industry sectors, including financial services, natural resources, agribusiness, manufacturing and technology.

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