Binary options regulation in the UK to change from Jan 2018 but protection to remain limited

Maria Nikolova

Although individual complaints about binary options can be referred to the Financial Ombudsman Service and consumers will have access to the Financial Services Compensation Scheme, there will be no compensation for losses suffered from binary options trading.

The UK Financial Conduct Authority (FCA) confirmed today that it will be taking over the oversight of the binary options sector effective January 3, 2018. This sector is currently regulated by the Gambling Commission.

From January 3, 2018, firms offering binary options will be authorised and supervised by the Financial Conduct Authority. In addition:

  • individual complaints can be referred to the Financial Ombudsman Service;
  • consumers will have access to the Financial Services Compensation Scheme.

However, those protections will not compensate investors for any losses from trading. The FCA reiterates its warning about binary options scams and the high risks associated with trading binary options.

Binary options are also regulated as investment products in many other European Union (EU) countries. Therefore, under EU financial services law, firms which are legally established and authorised in the European Economic Area (EEA) are entitled to do business in any other EEA country once certain procedural safeguards are met.

Although the FCA does not currently regulate binary options, firms offering binary options trading and operating as financial services firms in other EEA countries, are currently able to do business in the UK and will continue to be after January 3, 2018. If they are, they will appear on the FCA Register of financial services firms. In most cases the firm will still be regulated by its home-state regulator.

The UK authorities have recently sought to clamp down on binary options fraud. On October 17, 2017, the City of London Police conducted a day of action, which involved visiting 20 offices with the City of London Corporation’s Trading Standards. At the end of October, the UK High Court wound up binary options scam firms behind Magnum Options, following an investigation by the Insolvency Service. And early this month, the UK Insolvency Service announced that two binary options firms – Right Corp Limited and Curve Point Limited, had been placed in provisional liquidation. The action followed an investigation by Company Investigations of the Insolvency Service.

Today’s FCA warning about the binary options was accompanied by one about cryptocurrencies, indicating that, exactly as FinanceFeeds predicted, the FCA lumps cryptocurrency investment into same category as binary options fraud.

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