Canada Wants To Ban Binary Options . . . So What

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Canada Wants To Ban Binary Options . . . So What?

Fighting A Flood

Canadian regulators have long fought a rising flood of binary options fraud. Warning after warning from once province after another, backed up by more warnings from national level regulators have failed to curb what some in high position regard as nothing more than a transaction whose sole purpose stealing money. The latest move is a push to completely ban binary options in Canada, an action seen as critical by the CSA in its fight against fraud.

The proposed legislation is called the “Prohibition of Binary Options” . It is being put forth by the Candadian Securities Administrators, the CSA, an umbrella organization of all 13 provincial and territorial regulators. While not a national level policy maker it does have quite a bit of power as it bears the power of the “people”. Even without a national change in policy this organization could lead individual provinces and territories to adopt a ban on a local level.

The question is, just how will a ban help them stop fraud? There are already no legal binary options brokers operating in Canada, they are all off-shore operating with impunity, so just how will a ban stop them? Canada has been friendly toward binary options in a general sort of way, allowing registered and compliant brokers to operate legally. The problem is that they have not allowed any brokers to register, preventing a legal and safe environment from forming and allowing an onslaught of off-shore brokers, signal services and marketers to take advantage of a largely untapped North American market.

Is There A Better Solution? Hell Yes!

When it comes to warning the public Canada has not been shy to include regulated (in other countries) and non-regulated brokers alike. NADEX at one time was operating in the country and was forced to quit rather than allowed to register with local authorities. Likewise, many CySEC regulated brokers have been named as actively marketing to Canadians which, while true, could help the CSA control fraud if only they would work alongside CySEC and the ever strengthening EU regulation.

The IIAC agrees with this. The IIAC is the Investment Industry Association of Canada, a lobby group for Canadian investment firms, advisers and industry professionals. In their view legally operated binary options would be win-win for Canada. It would help control binary options fraud, provide a legal and safe outlet for Canadians who want to trade and allow the Canadian financial industry to participate in its forming, operation and regulation. In the end it is not binary options that are bad, it is the shady black-hat marketer cyber criminals who are the problem.

Canada has finally banned binary options

Trading of binary options is considered to be the worst kind of securities trading among financial regulators. In fact, some regulators don’t even consider binary options as a security, and that it is instead a form of gambling. Canada has now banned binary options trading once and for all, joining the ranks of countries like Israel, France and the Netherlands.

Why has Canada banned binary options?

There have been increasing cases of fraud committed in the binary options industry throughout the world, and Canada has faced the same issue. According to the Canadian Securities Administrators (CSA) chair, binary options had become the leading type of investment fraud in the country. Back in March, the CSA had issued a warning to all Canadians, but they had still not banned binary options trading.

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Even before that, the CSA had created a Binary Options Task Force to try and deal with the problem. This task force had created a website that would act as a resource to warn Canadians against trading binary options. Furthermore, they coordinated their efforts with online advertisers and mobile app companies to prevent advertisements luring Canadians to trade binary options.

Nevertheless, trading of binary options continued despite their efforts, adding further to the number of complaints to the CSA. According to the resource website provided, there had been no binary options broker licensed to operate in Canada. They were all unlicensed operators who would solicit Canadians with promises of great profits but only swindle them off their money.

It is true that most binary options brokers are pure scams as other financial regulators have discovered. Unlike brokers that offer Forex trading , binary brokers will have complicated structures to make themselves hard to track and thus impossible to be prosecuted. Furthermore, dealing with an offshore broker is always a bad option because it is difficult to persecute them, even if they are licensed and regulated.

Worse still, some of these binary options brokers were extremely ruthless and not even doing any trading at all. The broker would often deny any withdrawal requests or use the credit card information provided to make illegal withdrawals. This is why the institution finally banned binary options as a final measure.

How will the ban work and what will be the effect?

It is important to note that the banned binary options are those with a period shorter than 30 days. There are very short period binary options, going as low as 1 minute. The CSA equated such binary options with get-rich-quick schemes which the brokers use to lure in Canadians. The financial watchdog hopes that, by limiting the types of binary options available, they are going to reduce the chances of price manipulation and let people go for more legitimate services like invest money in Forex or stocks.

Besides, the brokers will not be able to dangle the promise of quick profit to potential clients. Therefore, only informed investors are going to be interested in the trade. There is also the idea that traders will be able to tell good binary options brokers from the bad considering whether they follow the regulations. The thinking is, one would not trade with a broker who clearly violated the laws.

To achieve this effort, the CSA will work with online advertisers to prevent further ads, tech companies that create mobile apps and even credit companies to deny transfer requests. However, other similar bans in other regions have not been successful, and this one may not be as effective either. For now, though, we just have to wait and watch what happens next.

Canada passes complete binary options ban, urges Israel to follow suit

Despite Canadian efforts to curb the industry as well as a proposed Israeli law to outlaw it, the number of complaints of binary options fraud in Canada has not dropped

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The Canadian Securities Administrators, the umbrella group for provincial securities regulators, has announced a complete ban on advertising or selling binary options to Canadians. The ban, announced Thursday, defines a binary option as a financial instrument that is “based on the outcome of a yes/no proposition” and that pays out depending on whether the price of a particular asset goes up or down within a given time period. The ban will apply to binary options whose expiry period is shorter than 30 days.

Binary options is a largely fraudulent Israel-based industry that is estimated to bring in $5 billion-$10 billion a year. Fraudulent Israeli binary options companies ostensibly offer customers worldwide a potentially profitable short-term investment. But in reality — through rigged trading platforms, refusal to pay out, and other ruses — these companies fleece the vast majority of customers of most or all of their money. The fraudulent salespeople routinely conceal where they are located, misrepresent what they are selling, and use false identities.

Jason Roy, chairman of Canada’s Binary Options Task Force and a senior investigator with the Manitoba Securities Commission, told The Times of Israel in an interview shortly after the ban was announced that websites offering binary options without a license were already illegal in Canada but that the newly enacted ban sends an even stronger message.

“Previously we would say there is no one registered in Canada to offer binary options. We thought that by [now] banning this product [outright] we would say not only is no one registered here to do this, but no one will ever be registered here to do this.”

Roy said the number of Canadians who have come forward in 2020 claiming to be victims of binary options fraud is on track to be about the same as in 2020, in spite of, or perhaps because of, Canada’s efforts to warn consumers.

“It looks like our numbers will be similar to last year — more than 800 complaints, and we’re at a similar pace for 2020. We had a big initiative in March of 2020 where we created the website binaryoptionsfraud.ca. We received over 10,000 visits in that month and there were more than 500 news stories written about it. We’re hoping there’s a drop in the numbers of Canadians actually being victimized, but because the word is out we may have more victims coming forward.”

Another possible reason that the number of complaints has remained steady in spite of the media attention and regulatory crackdowns is because, Roy said, there is a “lag time” between the moment someone becomes involved with an online broker to the time they come forward to complain of fraud.

“People don’t get involved with a criminal company and the next day call us. It’s usually six months later or eight months later. Often the scam being run is not ‘Let’s get the first amount of money and stop talking to him.’ It’s an ongoing pitch to get as much as they can and sometimes that lasts six months or more before the investor realizes that they keep asking for money and every time he asks to take money out they ignore him. At some point they have a moment of realization and they say, ‘Oh no,’ and that’s when they call us.”

Roy said Canada hopes to achieve three goals with the ban: warning investors, and persuading both credit card and technology companies to crack down.

“Our goal is to make every Canadian aware of binary options fraud and make it a toxic word here. When people hear the term they will immediately know it’s more than likely a scam and that they should contact us.”

He adds that the ban helps in Canada’s ongoing dialogue with credit card companies and banks to help stop the flow of money offshore, as well as with technology companies like Google and Facebook to stop advertising such products.

“We have been in contact with both major credit card companies in North America. They’re blocking certain companies at our request as well as identifying companies that are selling binary options and banning them from their credit card network.”

Roy said Twitter is the first big technology company to ban binary options ads and he hopes others will follow suit. On August 30, Twitter updated its advertising guidelines to ban “ads making misleading or deceptive claims, such as ‘get rich quick’ offers and binary options schemes.”

Ultimately, the goal is to make binary options company leave Canadians alone.

“We hope we’ll be able to protect Canadians by shutting off these various advertising and payments avenues or significantly increase the cost to acquire a Canadian victim. We hope the cost will go up so high that it won’t be worth it for them; they’ll have to focus their efforts elsewhere.”

From binary options to cryptocurrencies

Despite the fact that the number of complaints regarding binary options has held steady, Roy said he has noticed a shift in the type of products these same companies, many of them operating from Israel, are advertsing. In recent months, Roy has seen binary options companies switching to products like forex, CFDs and cryptocurrency trading.

“We heard from a family who lost $180,000 to a company called WMOption. They noticed on their account statements this spring that the company had changed its name to PrimeCFDs. It looks like this particular company changed their product from binary options to CFDs.”

The Times of Israel has been exposing the widely fraudulent binary options industry since early 2020, beginning with a March 2020 article entitled “The wolves of Tel Aviv: Israel’s vast, amoral binary options scam exposed. Last December, Canadian businessman Fred Turbide died by suicide after losing most of his life’s savings to an Israeli binary options company called 23Traders.

A draft law introduced earlier this year to ban Israel’s entire binary options industry, as well as forex and CFD companies that operated from Israel without a license, was subsequently watered down to apply narrowly to binary options. Critics have charged that this creates a loophole and that, if and when the law is passed, fraudulent binary options companies can simply tweak the product they offer and continue to operate. This could explain the change in products.

Having passed a first reading in the Knesset, and then been approved by the Knesset Reforms Committee on August 7, the narrowed-down bill is awaiting its final approval in the Knesset. Tal Schneider reported in Globes on September 28 that despite the persistent urging of the Israel Securities Authority, MK Rachel Azaria and Finance Minister Moshe Kahlon, the cabinet secretariat has yet to schedule a date for Israel’s binary options ban to be brought before the Knesset plenary for a final vote.

Roy told The Times of Israel that now that Canada has passed a binary options ban, he hopes Israel will quickly follow suit and pass its own.

“A number of countries have been in touch with Israel and have expressed concern about the whole binary options industry there. That’s what led Israel to introduce this law. I am not sure why the law is stalled.”

Added Roy, “My hope is that Israel does the right thing. It looks like they were on track to do the right thing and I hope they do it.”

Roy also said that the Ontario Securities Commission and the Autorite des Marches Financiers of Quebec both have whistle-blower programs allowing those with knowledge of criminal binary options activity affecting Canadians to come forward and share information.

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