OSC report sheds light on dark patterns and other manipulative digital engagement practices

TORONTO – The Ontario Securities Commission (OSC) published a new report today that examines digital engagement practices and how those techniques are being used on investing platforms in ways that may not align with an investor’s best interests.

Digital Engagement Practices: Dark Patterns in Retail Investing highlights several areas of concern about how increasingly popular investing platforms may purposely include features that are advantageous to the business and are to the detriment of the investor.  

Dark patterns are a type of digital engagement practice that employ user interface choices to coerce, steer, and/or deceive users into making decisions that benefit a business but may not align with clients’ best interests.

Dark patterns can disguise the cost of investing — such as hidden fees. They can also be used to obtain personal information without informed consent and can make it harder for an investor to withdraw funds or close an account. Additionally, the report sets out how regulators in Canada, the U.S., and the EU are responding to this emerging issue.

“Our research provides important insights for retail investors and regulators about the prominence of digital engagement practices by online investing platforms,” said Meera Paleja, Program Head of Investor Research and Behavioural Insights. “The OSC continues to explore the use of these practices, and we encourage registrants to consider how their clients’ investing decisions may be negatively impacted by their use.”

In addition to dark patterns, the study also looks at other digital engagement practices, including:

• Dark nudges – nudges that make it easier for users to make choices that are not in their best interests.
• Sludge – elements within a user interface that prevent users from making choices that they want to make.
• Targeted advertising – online advertising that uses data about people to specifically select and display ads to them. 

Dark Patterns in Retail Investing builds on findings from the OSC’s previous research on digital engagement practices, including OSC Staff Notice 11-796 - Digital Engagement Practices in Retail Investing: Gamification and Other Behavioural Techniques. That research discovered key insights into gamification and investor behaviour and found these techniques may have a negative impact on retail investor behaviour.

Improving the investor experience and expanding investor protection is a key OSC priority. The findings from these studies reinforce the benefit of using behavioural science as a policy tool by regulators. Increased awareness of the use of digital engagement practices among investors may help them to identify when their behaviour is being influenced.  

The OSC Investor Office partnered with the Behavioural Insights Team (BIT) on the study.

For more information on dark patterns and behavioural insights, investors can visit GetSmarterAboutMoney.ca and sign-up for the OSC’s popular e-newsletter, Investor News. In addition, OSC in the Community hosts events across Ontario to talk with people about investor protection.

The mandate of the OSC is to provide protection to investors from unfair, improper or fraudulent practices, to foster fair, efficient and competitive capital markets and confidence in the capital markets, to foster capital formation, and to contribute to the stability of the financial system and the reduction of systemic risk. Investors are urged to check the registration of any persons or company offering an investment opportunity and to review the OSC investor materials available at http://www.osc.ca.

– 30 –