After issuing several warnings to Quebeckers about the risks of binary options, the Autorité des marchés financiers (“AMF”) intends to formally prohibit the offering of such products to Québec consumers. The AMF would thus become one of the first regulators to ban the sale of binary options to the general public.
“Binary option platforms generally promise fast profits which are not paid out to investors. They’re run by people who are acting illegally and embezzling victims’ funds,” said AMF President and CEO Louis Morisset. “We are committed to rigorously and proactively enforcing the prohibition. In doing so, we are taking a leadership role in the global push by regulators and financial institutions intent on protecting the public.”
What are binary options?
Binary options are like wagers. Platforms offering these products illegally are similar to on-line casino sites. Investors are usually asked to wager on changes in the value of a currency, market index or stock in the short term—often just a few minutes. When that time is up, the investor receives a pre-determined payout or loses his wager. It’s an “all or nothing” proposition, a little like a game of chance. Even when investors earn “virtual” gains, they often cannot pocket the rewards. What’s more, they frequently fall victim to identity theft.
Consultation under way
The draft Regulation to amend the Derivatives Regulation, which is being published today for a 30-day comment period, proposes to prohibit the offering to individuals of binary options that expire in less than 30 days.
The draft Regulation also contains other measures concerning the identification of hedgers and the delivery of financial statements.
The Autorité des marchés financiers (“AMF”) is the regulatory and oversight body for Québec’s financial sector.