CSA proposes ban on sale of binary options

Canadian Securities Administrators has proposed banning the advertising, offering, selling or otherwise trading a binary option for an investor.

CSA is seeking comment on the proposal in National Instrument 91-102 Prohibition of Binary Options.

Read: Don’t let clients fall for binary options fraud

Binary options take the form of a wager in which investors bet on the performance of an underlying asset, often a currency, commodity, stock index or share. The time frame on the bet is typically very short — sometimes hours or even minutes — and the investor either receives a predetermined payout or loses the entire amount. In many instances, no actual trading occurs, and the transaction takes place for the sole purpose of stealing money. And investors who provide credit or personal information to binary-options sites frequently fall victim to identity theft.

Binary options are sometimes marketed as:

• all-or-nothing options,
• asset-or-nothing options,
• bet options,
• cash-or-nothing options,
• digital options,
• fixed-return options or
• one-touch options.

Firms and individuals involved in binary-options trading platforms are often located overseas. Investing offshore is a common red flag for fraud, as it may be impossible to get invested money back if something goes wrong.

Read: Inform clients about these nefarious threats

The comment period is open until May 29 in Alberta and Quebec; until June 28 in Manitoba and Saskatchewan; and until July 28 in all other participating jurisdictions. CSA encourages comments by May 29, 2017.

The British Columbia Securities Commission didn’t publish the proposed instrument for comment, but staff anticipates doing so after obtaining necessary approval.

Read the full proposal.

Also read: 15 offenders jailed in 2016: CSA

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.