CSA Investor Alert : Unregistered binary option platforms target Canadians
Monday, March 09, 2015
Winnipeg – The Canadian Securities Administrators (CSA) are warning investors to exercise caution when considering an investment in binary options. The CSA has become aware of multiple websites promoting binary options trading platforms that are soliciting Canadians. Many of these websites are trying to lure investors by making untrue and/or misleading statements about Canadian securities regulators’ oversight of binary options.
Binary options are essentially “bets” on how a particular underlying asset will perform in a limited amount of time. Despite listing Canadian contact information, many binary options trading platforms are based overseas purportedly in countries like Cyprus, Belize and the Seychelles, and the companies managing these platforms are often not registered to conduct business in Canada.
Offering investment services or products, whether online or in person, is a regulated activity. Investing with offshore companies operating outside of Canada can be risky and is a common red flag of investment fraud. Once offshore, it can be nearly impossible for an investor to recover their money.
Unregistered trading platforms currently soliciting Canadians:
This is not an exhaustive list. The CSA encourages all investors to visit aretheyregistered.ca to check the registration of any person or company offering binary options to Canadians. Anyone who has invested with these or other offshore binary options trading platforms should contact their local securities regulator.
March is Fraud Prevention Month. Throughout the month, investors can follow tweets from @CSA_News for additional helpful tips and information on being a smart investor and fraud prevention.
The CSA, the council of the securities regulators of Canada’s provinces and territories, co-ordinates and harmonizes regulation for the Canadian capital markets.
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Backgrounder: Binary Options
What are binary options?
Binary options are like an “all or nothing” wager on how an underlying asset will perform in a limited amount of time. Investors can have as little as 60 seconds to predict the market’s minute-by-minute fluctuations, which make investing in binary options extremely risky, even for seasoned investors.
Binary options are highly volatile and can produce wins or losses quickly, and because they are often traded in currency markets, they can present a high level of risk for many investors.
What are the risks?
There are several websites that allow users to trade binary options. Some may claim that these investments are risk-free or that the site will reimburse investors for lost wagers. However, these claims are inherently too good to be true; all investing involves some amount of risk, and most site disclaimers will clearly state that investors could stand to lose their entire investment.
Websites that facilitate binary options trades can sometimes expose investors to potential frauds, including manipulating the trading software to adjust a binary option’s price and payout. For example, if a trade is “winning” during its allotted period of time, the option’s timeframe may be arbitrarily extended until the trade becomes a loss.
Certain online binary options trading platforms have refused to credit customer accounts or reimburse funds after accepting users’ money. Would-be customers who have deposited money into a binary options trading account are later encouraged by the platform’s “brokers” to add additional funds. When these customers later attempt to withdraw their original deposit or the return that they have been promised, the “brokers” may cancel the withdrawal requests, refuse to credit the account, or ignore customers’ phone calls and emails.
Many binary trading platforms are based overseas, despite listing a Canadian phone number or address. This means that investing with these platforms will move an investor’s money out of Canada and make it nearly impossible to recover if something goes wrong. The companies operating these platforms may not be registered to conduct business in Canada, and all investors are encouraged to check the registration of a broker or firm before investing by visiting aretheyregistered.ca.