The Canadian Securities Administrators (CSA) has implemented Multilateral Instrument 91-102 Prohibition of Binary Options, making it illegal to offer, sell, advertise, or trade binary options shorter than 30 days to investors.
According to CSA Chair Louis Morisset, binary options are the leading type of investment fraud concerning Canadian investors today. He noted that the banning of binary options is a clear message that such products have staggering impact on individuals due to their risky characteristics.
"This ban positions the CSA among the world leaders in fighting back against binary options fraud and represents an important step in protecting Canadians," he said.
The CSA formed the Binary Options Task Force in 2016. Its Chair and Manitoba Securities Commission Senior Investigator Jason Roy said the ban supports the efforts of exposing the fraudulent nature of such products.
"It will all add up to fewer Canadians being exposed, and fewer Canadians being cheated," he said.
Just to give context, binary options usually take the form of a wager where potential investors place their bets on the performance of underlying assets. These assets can be in the form of currency, commodity, stock index, or share.
The process takes a very short amount of time. When the betting ends, investors either receive a predetermined payout or lose their entire bet.
Here's the catch: In most cases, no actual trading happens and the transactions are only for the purpose of stealing. Some of those who may have provided credit information could be put at risk of identity theft.
CSA warned that binary options trading platforms from overseas are already flagged as possible frauds. In such cases, investors might find it impossible to retrieve their money when things go wrong.
The regulator recommends all investors check the registration of the company or person offering products using aretheyregistered.ca.
"Any firm or individual selling investments or offering advice must be registered in the province where they do business. Registration helps protect investors because regulators will only register firms and individuals that are properly qualified," the CSA said.
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