NASAA issues binary options investor alert

Regulators are witnessing “the proliferation of online binary option platforms and a growing number of related investor complaints,” the alert says.

The litany of complaints includes allegations of high-pressure sales tactics, excessive fees, and outright fraud.

“Much of the binary option market operates through internet-based trading platforms. Such platforms often are not compliant with U.S. or Canadian regulatory requirements,” the alert says. “In the United States, some binary options list on regulated exchanges or trade on a designated contract market and are subject to regulatory oversight. In Canada, no business is currently registered or authorized to market or sell binary options.”

For some time now, regulators in Canada have been combating the rise in investment frauds involving binary options trading platforms, which are not registered to trade in Canada. The Canadian Securities Administrators (CSA) are currently considering a proposed rule that aims to outlaw the sale of binary options to retail investors.

Wednesday’s NASAA alert texpands a previous alert issued by the group back in 2015. Among other things, it provides information to help investors better understand binary options and the associated risks, and it highlights red flags associated with schemes involving binary options.

“Offering binary options contracts through a website is attractive to scammers because they can reach potential investors in numerous countries while masking their true identities and locations,” the alert says.

Additionally, the NASAA alert indicates that scammers often try to victimize investors more than once using a version of “recovery” schemes that are common to other sorts of investment fraud, which involves promising to help investors recover lost money for a fee.