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Canadian securities regulators called binary options ‘the leading type of investment fraud facing Canadians today, and the impact of this kind of scam on individuals is staggering.’Mark Blinch/The Globe and Mail

Canada's securities regulators announced a ban on short-term "binary options" Thursday, moving to prohibit the offer, advertisement or trade of such "wagers" shorter than 30 days.

With binary options, investors "bet" on the performance of an underlying asset, such as a currency or stock, for a predetermined and typically short period of time – sometimes just hours or minutes. They're often called "all-or-nothing" options; when the time is up, investors are generally supposed to walk away with either a preset payout or nothing at all.

But the Canadian Securities Administrators, the council comprised of Canada's provincial and territorial regulators, warns that in "many instances," no trading actually occurs, and the money spent on the option is simply stolen – in some cases, along with personal information that can lead to identity theft.

In a statement, Louis Morisset, chief executive of Quebec's Autorité des marchés financiers and chair of the CSA, called binary options "the leading type of investment fraud facing Canadians today, and the impact of this kind of scam on individuals is staggering."

In Canada, there are no firms or persons registered to sell binary options, which the CSA says should be the first warning sign for any investors being enticed to buy them. That enticement tends to come through social media, online ads, and unsolicited communications, sometimes falsely suggesting that the seller has Canadian operations.

Getting caught in the world of binary options schemes can have drastic consequences: late last year, an Edmonton business owner died by suicide after losing nearly $330,000 to such a scam.

Canadian regulators set up a task force to fight binary-options fraud in 2016, working on a ban with the help of numerous intermediaries through which binary-options "fraudsters" do their work, including credit-card companies, tech companies and advertisers.

"It will all add up to fewer Canadians being exposed, and fewer Canadians being cheated," said Jason Roy, chair of the task force and senior investigator with the Manitoba Securities Commission, in a statement.

Mr. Morisset said the ban puts Canada's securities regulators among world leaders in battling binary options fraud. "It conveys a clear message that these products are unsuitable for individuals because of their risky characteristics and that their trading is illegal," he said.

Canada's securities regulators received more than 800 reports and inquiries about binary options in 2016 alone. The CSA has launched a website, binaryoptionsfraud.ca, for investors to learn more, and recommends that investors always check to ensure that individuals or businesses selling investments are registered in the province in which they do business.