Regulators across the European Union are showing signs favoring a broader method of regulating binary options that would include oversight of the marketers and tactics used to get deposits. This movement has been growing but came to a head recently with the issuance of a statement from the ESMA. The ESMA, European Securities And Market Authority, is a governing body of pan-European financial markets. Their statement did not warn about fraudulent or unlicensed brokers but rather about the risks inherent in trading.
The warning was spurred by a growing number of complaints of client losses which has led the agency to believe CySEC is not in complete control of the situation. The ESMA has pushed CySEC to issue warnings and fines, and says a more standardized regulation is needed. Spain and Malta both echoed the ESMA’s statements, questioning the ability of regulations in place, even as new warnings are being issued.
UK FCA and Australia ASIC are Tightening Regulation
Issues with unregulated and/or loosely regulated brokers is not limited to the EU. Agencies in Canada and Australia continue to issue warnings against binary options in general and brokers specifically. Both countries will allow binary options trading, the difference is that there are no brokers in compliance and operating legally in Canada. The latest warning from the land of the Mounties is against MaxOption, operated by Tech Plex Ltd, which has also been warned by ASIC. ASIC’s most recent warning is against Titan Trade, a London based firm without the UK’s FCA licensing or Australia’s ASIC approval. Titan Trade is not a ThatSucks.com (former BinaryOptionsThatSuck.com) trusted broker.
Warnings typically are generated when a number of complaints against a broker have piled up. For example, in Canada an elderly citizen was targeted by aggressive marketers and wound up depositing more than $20,000. The scheme, called “the binary options scheme”, turned out to be an auto-trader/managed account, no broker name was revealed, which highlights an area of the industry regulators are paying more attention to, the marketing. Aggressive marketing tactics are being used to push potential investors into trading binary options before they fully know what they are getting into. Sometimes the marketers work directly for the broker but more often than not are associated with a shady, unlicensed, third party marketing service.
Danish regulators are doing something about this problem. The Danish Financial Services Authority went after a website called Den Danske Metode for soliciting investment clients, and teaching others how to do the same, without the proper license. These activities fall under the jurisdiction of the FSA according to the Financial Business Act. Den Danske Metode was using aforementioned aggressive marketing tactics to pressure clients with no knowledge of binary options into making deposits and promising big returns, he website was also set up to teach others how to use their system. This is not the first time a regulator has gone after the marketing and it will not be the last. The move for a more standardized regulatory environment will see to that.
US CFTC Fines Brokers over $4.5M
Warnings are not all that is being doled out by regulators, or due to regulator cooperation. The CFTC just fined VaultOptions and Global Trader 365 over $4.5 million for soliciting US Clients. The deal includes fines and reparations to clients. In response to the fines both brokers have since gone out of business.