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Quebec’s security regulator is proposing a ban on short-term binary options to the general public, citing fraud and rampant scams.Getty Images/iStockphoto

Quebec's securities regulator is proposing to ban the sale of short-term binary options to the general public, saying the securities are being used in scams.

The Autorité des marchés financiers said Wednesday that it is proposing an outright ban after issuing several warnings to the public about the risks of investing in binary options and seeing fraud continue to emerge.

"Binary option platforms generally promise fast profits which are not paid out to investors," AMF chief executive officer Louis Morisset said in a statement. "We are committed to rigorously and pro-actively enforcing the prohibition."

The AMF said it will become one of the first regulators anywhere to impose an outright ban on binary-option sales.

Binary options are "all or nothing" wagers on how an asset, such as a currency or stock, will perform over a limited time period. Regulators have previously warned about rampant scams, saying investors cannot collect any of the profit they appear to have earned, and some have unauthorized charges added to their credit cards.

The AMF ban would apply to sales of binary options or derivatives with maturities of less than 30 days. The regulator said it will seek public comment on the proposed ban until March 3 before moving forward.

Quebec's ban would not have a significant impact on the investment industry in Canada because no firm is registered to trade binary options in Canada. Investors are typically being targeted by fraud conducted from other countries.

Binary options were in the news this week when the Ontario Securities Commission issued an investor alert, warning that several websites promoting binary options were misusing comments from television personality and Conservative party leadership hopeful Kevin O'Leary. The OSC said Mr. O'Leary's representatives had confirmed he is not associated with the sites, has not approved the use of his image and is not promoting the use of binary options.

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