Canadian financial regulators are among the most active in the world in terms of warning against unregulated binary options providers. Recently, local securities commissions across Canada formed a task force to crack down on fraud in the market.
To understand how the regulators view the situation, Finance Magnates interviewed regulator Doug Muir, Director of Enforcement at the British Columbia Securities Commission (BCSC) – the most prolific of all the Canadian authorities in issuing warnings to the public.
Why is the BCSC so active?
All of the securities regulators in Canada are working hard to protect the public against binary options frauds. We work with the Canadian Securities Administrators (CSA), which is an umbrella organization of Canada’s provincial and territorial securities regulators, to raise awareness and protect investors from binary options, primarily through the CSA’s Binary Options Task Force.
The task force ran a very successful education campaign in March 2017 as part of Fraud Awareness Month, including the launch of the investor education website binaryoptionsfraud.ca/.
The BCSC takes a proactive approach to help protect British Columbia investors, from all kinds of misconduct, by publishing our Investment Caution List. It includes the names of:
- unregistered foreign brokerage firms that have solicited B.C. investors to open trading accounts;
- businesses from other jurisdictions that have solicited British Columbia residents to buy unqualified investments; and
- businesses connected, or purporting to be connected, to British Columbia that have solicited investors in other jurisdictions to purchase unqualified investments.
Our Investment Caution List includes binary options websites – since April 2015, we have put 38 binary options entities on the Investment Caution List.
We also believe strongly in investor education and fraud awareness, which is why we created award-winning tools like our InvestRight.org website and BeFraudAware campaign. We routinely post blogs about new additions to the Investment Caution List on InvestRight.org.
Fraudulent activity undermines the credibility and integrity of the capital markets, as well as investor confidence and safety, which is why these proactive methods are so important.
If a binary options firm were to try and become licensed in British Columbia, would it have a chance?
No person is authorized to trade binary options in any Canadian jurisdiction. Any application to be registered to sell binary options would be decided on a case-by-case basis.
Isn’t there a risk that by not regulating binary options firms, you are sending traders to unregulated websites?
Many websites claiming to offer binary options are simply vehicles for fraud. These fraudsters have no interest in registration or compliance with securities law, because they are not conducting any real business. They are just out to steal money.
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Do you consider fraud to be inherent to binary options, or is it just a characteristic of unregulated entities?
Binary options frauds have become a popular vehicle for fraudsters, because it is relatively easy for fraudsters to set up legitimate looking websites and begin luring investors with the promise of quick and easy money through aggressive marketing and advertising. The binary options trading that is advertised to retail investors is overwhelmingly fraudulent, which is why the BCSC and the CSA have focused on warning Canadians against binary options trading.
Other than warnings, what can really be done to protect clients from unregulated firms?
Investor education is key: if people can recognize a fraud, they won’t give their money to a fraudulent scheme.
Individuals and companies need to be registered to sell securities in B.C., or rely on a registration exemption set out under the Securities Act. The BCSC encourages all investors to check the registration status of any person or company offering them an investment opportunity. If someone is not registered, then it is a potential red flag that their investment opportunity may be illegal. More information on how to check registration can be found at aretheyregistered.ca.
The BCSC actively seeks out binary options advertisements and we follow up on complaints received from investors. We are also part of the CSA’s Binary Options Task Force, which I’ve described in greater detail in the answer below.
How are you cooperating with other regulators and law enforcement agencies around the world?
The BCSC is part of the CSA’s Binary Options Task Force, working to raise awareness and protect Canadians from binary options scams.
In addition to running a strong education campaign, the CSA’s Binary Options Task Force has undertaken a number of important initiatives to protect Canadians from unregistered sellers, including working with online advertisers and mobile companies to eliminate binary option advertising and mobile apps in Canada, coordinating efforts with international organizations and governments, creating and maintaining a system to share and track fraudulent activity across the country, and working closely with the fraud teams at major credit card and financial institutions to cut off funding mechanisms.
The CSA’s binary options fraud website is binaryoptionsfraud.ca/.
What are the main challenges you face in your day to day work?
The increasing use of the internet and social media to commit securities fraud is a problem, and binary options fraud is an example of that. Given how far and fast these can reach victims, we need to continue to work hard to educate people and gather information quickly from the public about ongoing frauds so we can warn the public and stop people from getting harmed.
How do fraudulent websites appear on your radar?
The BCSC receives information in a number of different ways. We rely on information and tips from investors – we encourage anyone who thinks they’ve been a victim of any securities misconduct or approached with any illegal investment opportunity to report it to us immediately. We also actively seek out binary options advertisements and websites.