CSA, IIROC ‘closely monitoring’ extreme price movements in certain stocks

By Staff, with files from The Canadian Press | February 1, 2021 | Last updated on February 1, 2021
2 min read
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Amid a surge in retail investor trading tied to Reddit chat rooms, Canadian securities regulators are warning investors about relying on bulletin board chatter when making investment decisions.

In a joint statement, the Canadian Securities Administrators (CSA) and the Investment Industry Regulatory Organization of Canada (IIROC) said they’re “closely monitoring” extreme price movements in certain stocks and how that may contribute to market volatility in Canada.

“We will take appropriate regulatory action to protect investors if we identify that abusive or manipulative trading activity may be taking place,” it said.

At the same time, the regulators cautioned investors to be careful about the sources they’re using to make trading decisions.

“Online chat rooms are unregulated and may contain information that is inaccurate or inappropriate for some investors,” the regulators said in their statement.

They also stressed that they’re cooperating with one another — and with authorities in other markets — to provide oversight and ensure market stability.

“We are monitoring market activity in real-time to support healthy Canadian capital markets and to protect investors. Canada’s capital markets remain strong,” they said.

They’re also in “close contact” with industry firms and ensuring issuers are disclosing material information that might affect their stock prices.

The statement from regulators comes after Toronto-based robo-advisor Wealthsimple moved last week to label GameStop, BlackBerry and other companies ‘risky’ because of recent volatility.

Other Canadian investment firms are so far not following Wealthsimple.

HSBC Bank Canada says its InvestDirect platform does not have any warnings particular to individual companies, since it does not provide any recommendations or financial advice.

An HSBC spokeswoman says the website carries a general warning that investment products do not guarantee profits and that clients should understand the risks before investing.

When asked whether whether BMO InvestorLine has plans to label “risky” securities, a spokesman said that its clients are self-directed.

BMO says the brokerage gives clients the information to make informed investment decisions, including news and research materials on the risks of various investments, including stocks and options.

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Staff, with files from The Canadian Press

The Canadian Press is a national news agency headquartered in Toronto and founded in 1917.