Skip to main content

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 tightened their prohibition of short-term "binary options" Thursday, but warned that the global nature of such frequently-fraudulent asset-performance wagers will make the ban challenging to enforce in the short term.

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.

In Canada, there are no firms or persons registered to sell binary options, though Canadians are often solicited through digital means.

Story continues below advertisement

The Canadian Securities Administrators, the council comprised of Canada's provincial and territorial regulators, is moving to prohibit the offer, advertisement or trade of most binary options shorter than 30 days, which would account for the vast majority of these "wagers." The CSA is also hoping to gain more support from platforms that help enable their trade.

While countries such as Belgium, France and the Netherlands have taken various actions against binary-options fraud and advertising, Louis Morisset, chair of the CSA, chief executive of Quebec's Autorité des marchés financiers, said he hopes the Canadian ban "will help influence others" to take action, making it easier to crack down on schemes that permeate national borders.

It's common with binary options that 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. Investors tend to be enticed into such schemes through social media, online ads, and unsolicited communications, sometimes falsely suggesting that the seller has Canadian operations.

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.

Mr. Morisset said the Canadian ban will serve as far more than just a warning for investors. It's also a means to encourage intermediary platforms to prohibit binary-option purveyors, and for other jurisdictions to put similar bans into place.

"With a ban, it's a clear indication that these products are illegal," he said. That makes it "much easier to have discussions with those intermediaries, for them to eventually stop advertisements and facilitating those illegal trades." Social media ads are a major source of solicitation; Twitter, he noted, has already banned ads for binary-options schemes.

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

Story continues below advertisement

Mr. Morisset said the ban puts Canada's securities regulators among world leaders in battling binary-options fraud. "These products are toxic, and very often fraudulent. Investors should not try to make money off of those very toxic products," he said.

Because most binary options bet on asset-price fluctuations over the course of hours or minutes, Mr. Morisset said he was confident most fraudulent activity would be covered by banning those with time frames shorter than 30 days.

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.

Report an error Editorial code of conduct
Comments

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • All comments will be reviewed by one or more moderators before being posted to the site. This should only take a few moments.
  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed. Commenters who repeatedly violate community guidelines may be suspended, causing them to temporarily lose their ability to engage with comments.

Read our community guidelines here

Discussion loading ...

Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.
Cannabis pro newsletter