FCA now regulates binary options

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FCA now regulates binary options

“Binary options allow a consumer to make a bet on the expected value or price of a stock, commodity, currency, index, or just about anything that is capable of being measured in financial terms,” – explains the Financial Conduct Authority. Up until 2020, these products were regulated by the UK Gambling Commission, if the company offering them also offered other forms of gambling. From January 3rd, 2020, all responsibility regarding the binary options will shift to the Financial Conduct Authority.

The main reason cited for the decision is the risk that is associated with binary options. These tools can lead to extremely heavy losses for the customers and can be used to defraud individuals as well. “A key risk of the product is the fact that they are typically priced in a similar manner to fixed odds bets since their value is determined by the probability of an event happening. Investors are offered higher returns for lower probability events and lower returns for higher probability events. For investors to make a profit from trading they need to ‘beat the odds’ on a regular basis, which a majority of investors do not,” – explained a statement from the FCA.

From now on, companies offering binary options will have to be authorized by the FCA

As reported by Nyecasino.casino, starting this year, the Financial Conduct Authority became the supervisor of the firms that offer binary options. Furthermore, these products will be treated by the regulators as investment products, following the established practice in the European Union countries. Customers who want to make complaints regarding certain providers will have to contact the Financial Ombudsman Service.

The move is triggered by the proliferation of scams associated with the binary options

In the first half of 2020 alone, reportedly about 700 people became the targets of binary options scams and lost over 18 million pounds in total. The initial response from the authorities was to raid 20 London offices. In a broader perspective, the control over the companies offering the binary options was moved from the UK Gambling Commission to the Financial Conduct Authority.

“UK consumers are being increasingly targeted by binary options investment scams, which commonly promise higher than average returns for bets that never occur and manipulate software to distort prices and payouts. They also commonly refuse to return client funds and break all contact with customers. Fraudulent binary option traders often advertise on social media – the advertisements link to websites that are well-designed and professional looking,” – warns the FCA.

Binary options scams

Find out how binary options work, how to avoid scams and what to do if you are scammed.

Update: The sale of all binary options to retail consumers is now banned. If you are offered binary options, it is probably a scam.

Binary options are a form of fixed-odds betting. Typically, a trade involves whether an event will happen or not (for example, will the price of a particular share or asset go up) and the outcome is either yes or no.

If the investor is correct, they ‘win’ and should see a return on their investment; if they’re wrong, they lose their full investment.

From 2 April 2020, we permanently banned firms from selling binary options in the UK.

This follows the European Securities and Markets Authority’s (ESMA) temporary ban on the sale of binary options to retail consumers across the EU, including the UK, since 2 July 2020. Our ban includes certain binary options that were excluded from ESMA’s temporary ban.

How binary options scams work

Binary options fraudsters often advertise on social media – the ads link to websites that are well-designed and professional looking.

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The firms operating the scams tend to be based outside the UK but often claim to have a UK presence, often a prestigious City of London address.

Scam firms may manipulate software to distort prices and payouts – they then suddenly close consumers’ trading accounts, refusing to pay back their money.

We are aware that scammers are targeting consumers searching for investments online, in particular through search engines like Google and Bing. Those offering or promoting products or investment opportunities found through search engines are not necessarily authorised or regulated by the FCA. You can check the FCA Warning List for firms to avoid.

How to protect yourself

Be wary of adverts online and on social media promising high returns from binary options trading.

You should only deal with financial services firms that are authorised by us. As the sale of binary options to retail consumers is now banned any firm offering binary options services is probably unauthorised or a scam.

If you have any doubts, check the Register to ensure a firm is authorised. You can also check our Warning List of firms to avoid.

You should check the firm isn’t a clone firm by asking for their firm reference number (FRN) and contact details and then calling them back on the switchboard number on our Register – never use a link in an email or website from the firm offering you an investment.

Always be wary if you’re contacted out of the blue, pressured to invest quickly or promised returns that sound too good to be true.

If you have been scammed

You can report the firm or scam to us by contacting our Consumer Helpline on 0800 111 6768 or using our reporting form.

If you have already invested in a scam, fraudsters are likely to target you again or sell your details to other criminals.

The follow-up scam may be completely separate or related to the previous fraud, such as an offer to get your money back or to buy back the investment after you pay a fee.

If you have any concerns at all about a potential scam, contact us immediately.

fca regulates binary options

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