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The WhatsApp Inc. mobile-messaging application WhatsApp is displayed on an iPhone. Securities regulators are warning users to be wary of investing-related spam being sent through messaging apps, including WhatsApp.

Brent Lewin/Bloomberg

Canadian investors are being warned by regulators about fraudulent stock promotions that are being sent through popular smartphone messaging applications.

The Canadian Securities Administrators (CSA), the council of the securities regulators of Canada's provinces and territories, have recently seen a spike in the number of cases where mobile applications – such as WhatsApp – are being used to generate investor interest in stock promotions.

Investors are being cautioned about spam that can be sent on any mobile application used for instant communication via messaging, but the most commonly used among fraudsters is WhatsApp – a mobile application that allows users to instantly exchange messages without having to pay for the short message service (SMS).

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"Like other 'pump-and-dump' schemes that seek to create artificial interest in a particular stock, these promotions use spam to talk up the benefits of a company and convince people to invest," the CSA says in the investor alert.

"What investors don't know is that the person or company touting the stock owns a large amount of it. As more and more investors buy shares, the value skyrockets. Once the price hits a peak, the scam artist sells their shares and the value of the stock plummets. Investors are left holding worthless shares."

The use of mobile spam promotion has also been flagged south of the border. Last month, a U.S. regulator, the Financial Industry Regulatory Authority (FINRA), issued an alert to warn investors to be wary of stock promotions sent through popular messaging apps such as WhatsApp.

FINRA released details of scammers who had transmitted spam messages through the mass push feature of a messaging app promoting penny or "microcap" stocks.

WhatsApp users were flooded with text messages touting Avra Inc. The messages appeared to be sent from individuals at well-known brokerage firms. The text message would talk up the stock, claiming that Avra was "going to double in the next few days" or "going up 300 per cent next week."

Investors should ignore any promotional spam they receive and report it to their provincial or territorial securities regulatory authority. Users of messaging applications should treat these messages with extreme caution and should act by deleting the messaging without a response.

"This is the same fraudster approach we have seen in the past with e-mail spam, but with a modern-day twist," says Richard Gilhooley, a spokesman for the British Columbia Securities Commission. "We want people to be clear that if they get these messages via e-mail or a messaging application or even skywriting, don't pay attention to them."

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