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Avoiding Internet Stock Fraud

Online Fraud Warning

The Investment Dealers Association of Canada (IDA) issued a bulletin on August 24, 2006, warning of fraudulent activities targeting online trading accounts. This bulletin is intended to raise the level of security awareness among online trading customers. To date, CIBC is not aware of any fraudulent activity affecting clients of CIBC Investor's Edge, CIBC Imperial Investor Service or CIBC Wood Gundy.

The IDA is advising customers to be suspicious of e-mails requesting personal information and to take measures to protect your computer from viruses and spyware.

CIBC would also like to remind its customers that:

  • We will never send you an e-mail asking you to click on a link and enter personal information
  • You should have a firewall and up to date anti-virus and anti-spyware software on your computer
  • You should look for the "closed lock" symbol in the bottom-right of your browser window on any website where you share personal information. Learn more

What You Can Do

CIBC wants to help you stay informed. To learn more about how you can protect yourself and avoid becoming a victim of online scams, see What You Can Do.


The Internet is an excellent tool for investors to easily and inexpensively conduct research on companies of interest. However, the Internet is also an efficient means of disseminating information related to fraudulent investment opportunities and artificially inflating the price of thinly traded securities.

Any investment opportunity you learn about via the Internet should be approached with extreme caution and be fully investigated before you invest. Information that appears on a computer is not necessarily true. Messages from experienced fraudsters often look very professional and may appear to be legitimate investment opportunities. You should never make an investment based solely on the content of an online newsletter, bulletin board or mass e-mail.

Securities regulations DO apply in cyberspace

The power of the Internet has tempted many new ventures to try to sell securities to the public illegally. In Canada, and in many other countries, the general rule is that securities can be distributed to the public only after the regulators have vetted the company's prospectus. The failure of companies, dealers or advisers to comply with regulations should be a red flag that alerts you to a potential investment scam.

Your securities regulator can tell you whether an individual or company is registered to trade or advise in your area and whether the company selling the securities has filed a prospectus. Even then, the securities must be distributed through a registered dealer. You can check a person's registration by contacting your securities regulator.

Some simple precautions can keep you from becoming a victim of Internet investment fraud:

  • Don't believe everything you read
    • Evaluate the information you get online in the same way that you would a whispered hot tip from a stranger
    • Exercise healthy skepticism, especially around investment opportunities in remote places where a full investigation is difficult, or opportunities that cannot be explained in simple business terms
    • There’s no such thing as inside information - if it’s true, it’s illegal to divulge for trading purposes; if it’s false, it has no value beyond hype
  • Know who you are talking to
    • The Internet is an ideal medium for misrepresentation; disguising identities and misrepresenting qualifications online is much easier than in person.
    • Your online service provider may not adequately vet – if at all – participants in investment bulletin boards.
  • Don't buy thinly traded, little known securities on the sole basis of online information
    • Securities with limited trading are most susceptible to manipulation
    • Ensure your research and investment decisions are based on reputable information
    • When in doubt, get a second opinion from a qualified, independent investment professional who has no stake in the opportunity you are investigating
  • Beware of conflicts of interest
    • There are two reasons why people are enthusiastic enough about an investment opportunity to tell you about it online. One is that that they are reputable, independent analysts. The other is that they have a vested interest in the investment. If it’s not the former, then assume it’s the latter, whether or not they choose to disclose any conflicts of interest.