Canada’s binary options ban fails to deter fraudsters
Months after the announcement of the ban on binary options offering to retail investors in Canada, fraudsters adopt a new strategy – they claim to be from companies regulated by IIROC.
Nearly seven months have passed since Canada’s authorities announced a ban on the offering of binary options to retail investors. The measures, however, seem to have had little effect on certain entities that have adopted new strategies in order to solicit investors’ money.
The Investment Industry Regulatory Organization of Canada (IIROC) on Thursday warned Canadian investors not to be fooled by fraudsters attempting to illegally sell binary options under the guise of legitimate investment dealer firms regulated by IIROC.
The organization has been made aware of at least two entities that falsely claim to be regulated by IIROC:
- CDFtradeoption.com – operated by Westrade Holdings, Inc;
The organization reminds the public that binary options cannot be offered or sold to retail investors in Canada. No IIROC dealers are authorized to sell binary options to retail investors in Canada.
This fraudulent trend sparks concerns about the potential of a ban on offering of such toxic products as binaries to stop scams. The European Securities and Markets Authority (ESMA) has recently agreed measures to prohibit offering of binary options to retail investors but the developments in Canada cast a shadow of doubt on whether the ban in Europe would have the desired effect.
Let’s also recall that when the Canadian authorities first proposed to ban binary options, the proposal faced serious opposition. The Investment Industry Association of Canada (IIAC), which represents 130 Dealer Member firms regulated by IIROC, insisted that the ban must apply only to illegal binary options trading offered by unregulated binary options firms. IIAC argued back then that its members should be allowed to offer binary options to retail investors.
There have also been calls to allow trading binary options on-exchange, as this is allowed in the United States.
On the other side of the spectrum of opinions is the feedback by organizations like the Canadian Advocacy Council for Canadian CFA Institute Societies (CAC), which backed the binary options ban proposal and even went beyond it by questioning the status of OTC Forex. The organization queried whether the sale of similar financial instruments to retail investors should also be restricted.