Global Regulatory Update – Regulators Broaden Their Focus
Binary Options Regulation – The Noose Tighten
A number of recent developments reveal the global binary options regulators are tightening the noose around industry scams. Regulators continue to issue warnings against unregulated brokers but have broadened their focus to include service providers and marketing tactics. The latest round of updates includes the usual black listed brokers and warnings of non-regulated entities soliciting binary options but also new warnings focused on the methods which these brokers use to attract customers as well services provided by non-broker websites. This is a new twist in the regulatory evolution as previous moves have targeted safety of funds and financial transparency.
Five regulators have issued new warnings in recent weeks. The recurring theme among them is that binary options are a regulated financial product, but that there are still scams, shady dealings and fraud within the industry. CySEC’s warning illustrates this point. They have issued a warning concerning aggressive marketing of complex financial products. Binary options and forex are included in the warning but it is targeted at CIF’s, Cyprus Investment Firms, which are prohibited from using such tactics. The problem, according to them, is that retail traders often don’t understand the risks involved with trading complex financial instruments and that some sources fail to fully warn of the risks involved.
The sentiment is echoed in Japan where the FSA is in charge of regulating the industry. They have black listed two brokers who offer options to Japanese clients. Their stance is that if a website supports Japanese language and is advertising to Japanese traders it is one that should comply with Japanese laws. One of the many ways in which these brokers, PlatinumOption and TraOp, are violating FSA regulation is by offering 60 second expiry. The FSA expressly forbids options with such short time frames. Neither broker is even located in Japan, Platinum is headquartered in Singapore and TraOp is based in the Seychelles.
Australia has jumped into the regulatory fray and is of the same mindset as CySEC and the FSA. They are faced with the same issues including unlicensed brokers, aggressive tactics and unregistered service providers. They, like CySEC, have included binary and forex in a larger crackdown on the broader spectrum of OTC investment products. They specifically mention lead generation services which use aggressive cold calling techniques to connect Australian traders with off-shore, unregulated, brokers and signal services. One such robot is 100PercentProfitBot.com, a robot service claiming all the others are fake, they are the real deal.
Regulators Have Their Hands Full
Canada’s AMF, one of the most vocal of regulators, remains on alert as well. They have added ImperialOptions to their list of unregulated brokers taking note of their tactics. This, and other brokers, are making false claims of association with the AMF and/or claiming they are there to help recoup losses with only a small additional deposit. Canada allows binary options but requires all brokers and service providers to register with the appropriate authorities. The thing that keeps more brokers from doing so are tough capital requirements and participation in the deposits guarantee scheme.
Regulation is helping the industry but is also providing a portal for a new style of scam, the clone. The British FCA, which is on the brink of taking full responsibility for binary options, has been faced with an assault of websites that look just like other, more well known and regulated, businesses and use that to defraud the public. The most recent example is Garnier Global Finance, an obvious knock off of regulated and licensed firm Westhouse Securities LTD. The FCA warns clones are not associated with the original websites which are usually well respected entities.
The Bottom Line
Regulators are cracking down and they are doing so in a way that targets not only the way the brokers operate, but how the industry as a whole operates. The regulators are saying not only is it necessary to be financially responsible with deposits, accounts and withdrawals it is also a requirement to market in a way that is honest, open and fully explains the risks involved with trading. The bottom line, regulators are expanding their influence in the industry and helping to usher it into the global family of financial products, if only on a region by region basis.