FCA introduces permanent ban on offering of binary options to retail consumers

Maria Nikolova

The FCA’s rules are permanent and come into force on April 2, 2019.

Following a consultation into proposals on the prohibition of the sale of binary options to retail customers in the UK, the Financial Conduct Authority (FCA) today confirms that all firms acting in or from the UK are prohibited from selling, marketing or distributing binary options to retail consumers.

The new rules are introduced in response to concerns about the inherent risks of these products, and the poor conduct of the firms selling them. This has led to consumer harm in the UK and internationally through large and unexpected trading losses.

The FCA’s rules are in substance the same as the European Securities and Markets Authority’s (ESMA) existing, EU-wide temporary restrictions on binary options. However, the FCA is also applying its rules to so-called ‘securitised binary options’ that were excluded from ESMA’s prohibition. Securitised binary options are not currently sold in or from the UK. The FCA thinks these products pose the same risks for investors and so is extending the scope of the prohibition to prevent a market developing for these products.

The FCA’s rules are permanent and come into force on April 2, 2019.

The FCA estimates the permanent ban on binary options could save retail consumers up to £17 million per year, and may reduce the risk of fraud by unauthorised entities claiming to offer these products.

As the sale of binary options to retail consumers is now prohibited, any firm offering binary options services to retail consumers is likely to be a scam.

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