FINRA warns US investors of binary options risks

Shortly after the U.S. Commodity Futures Trading Commission (CFTC) starting publishing a RED List of binary options and Forex brokers that target US investors without having the necessary registration to do so, the wave of alerts against the dangers of binary options continues across the United States.

The US Financial Industry Regulatory Authority (FINRA), which has 642,981 brokers under its supervision, today published a warning, dedicated particularly to the risks associated with binary options trading.

The document, entitled “Binary Options: These All-Or-Nothing Options Are All-Too-Often Fraudulent”, is released after the organization received numerous signals concerning binary options through its FINRA Securities Helpline for Seniors – HELPS™.

Callers have reported situations in which business entities claiming to be binary options trading firms:

  • do not deposit investor funds into the investor’s account;
  • deny requests to return funds;
  • require a fee be paid in order to receive a return of their investment assets.

images-2There was at least one case of a fraudster posing as regulatory organization. The fraudster accused the investor of engaging in illegal binary options trading and demanded payment of fine money.

There are also instances in which an investor is contacted by a firm claiming to be able to get the investor’s money back for an advance fee.

FINRA cautions investors who are considering binary options to be particularly wary of non-U.S. companies that offer binary options trading platforms. These include trading applications with names that often imply an easy path to big wealth, and demo accounts that allow users to try their hand at binary options trading without risking personal assets. Such accounts can serve as bait to lure investors into sending money to fund a “real” trading account, or open the door to identity theft, by requesting personal information.

Additional signs of fraud include pressure to send additional money, and excuses for why the firm cannot credit gains to a customer’s account, close an account or send purported gains to the investor.

FINRA reminds investors that if they purchase binary options offered by persons or entities that are not registered with or subject to the oversight of a U.S. regulator, they may not have “the full benefit of the safeguards of the federal securities and commodities laws that have been put in place to protect investors, as some safeguards and remedies are available only in the context of registered offerings.”

In conclusion, FINRA reiterates that unless investors can verify the registration status of the trading platform, products, firms and financial professionals, they should do not trade with them, should not send any money, and should not provide their personal information.

OTC binary options trading is not permitted in the United States. Binary options can be traded on several exchanges, which have authorization from the CFTC.

To view the full text of the warning from FINRA, click here.

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