Complaints spike about DIY investing: regulator
Canada's national investment industry regulator says it has seen a 270-per-cent spike in complaints and other calls about do-it-yourself investing services, a surge that comes as retail investors have flocked to the platforms during COVID -19 lockdowns.
“Since the start of the pandemic, we've seen a significant surge in inquiries and complaints,” the Investment Industry Regulatory Organization of Canada said Tuesday.
A spokesperson said a discrete increase in calls has been fielded over the “past few weeks,” a period in which there were extreme price swings in some stocks, such as GameStop Corp., BlackBerry Ltd., and AMC.
Citing the recent market volatility, which appears to have been driven in part by retail investors on do-it-yourself platforms such as the U.S. app Robinhood, the Canadian industry regulator urged investors conducting their own trades to arm themselves with reliable information and enough knowledge about investment products to protect themselves from market volatility that can trigger losses.
“We urge investors to be careful about where they are getting their investing information, as many sources are unregulated and may contain inaccurate information,” said Lucy Becker, IIROC's vice-president of public affairs and member education services. “This may lead to misinterpreting investment research and subsequently betting the farm.”
Last month, inundated with demand, a number of do-it-yourself trading platforms — including at some of the country's biggest banks — struggled with delays in processing trades and intermittent outages.
The IIROC spokesperson would not elaborate on the nature of the complaints the regulator has received, other than to say it is “a combination of … dealer and service issues.”
Online do-it-yourself platforms — also known as execution-only platforms — have captured a growing number of retail investors in recent years by giving traders a cheaper option than full-service dealers.
In Canada, DIY investing is possible on a range of platforms, some housed within major banks. A dozen or so online brokers offer DIY investing, including Questrade, Qtrade Investor, Scotia iTrade and TD Direct Investing.
The latest market volatility prompted IIROC to highlight the dramatic shift to do-it-yourself platforms and the spike in calls and complaints it has received for the second time in less than six months.
Since 2017, more than half of the calls — 57 per cent — have come from those over age 55.