Artificial Intelligence and Retail Investing: Scams and Effective Countermeasures

People have been orchestrating financial fraud and scams for centuries. But the recent rise of generative AI has massively increased the scale and sophistication of scams, including in capital markets. Regulators are rightly concerned and focused on how to protect retail investors.

BIT and the Ontario Securities Commission investigated this urgent issue through an innovative, empirical approach. In this report, we present our findings on the impact of AI on susceptibility to scams and effective mitigations to protect investors. 

Our findings include a summary of existing research and an original experiment simulating a social media feed that includes both legitimate and fraudulent investment opportunities. 

Key takeaways for regulators

• Generative AI is being used to ‘turbocharge’ existing scams by increasing their volume, sophistication and reach
• Scammers are capitalizing on growing interest in AI, creating new scams that sell the promise of ‘AI-enhanced’ investment opportunities
• AI-enhanced scams pose significantly greater risk to investors – study participants invested 22% more in AI-enhanced scams than in conventional ones
• Mitigations can materially reduce the harm posed by AI-enhanced scams; a web browser plug-in that flags potential scams is particularly promising – it reduced the amount invested in scams by 31% 

This report is a must-read for securities regulators taking an evidence-based approach to AI-related regulatory activities across Canada and around the world. Contact us here if you would like to discuss further.