Canada is concerned with the growing menace of binary options and as a result the country’s financial regulator, the Canadian Securities Administrators (CSA) has proposed a nationwide ban on the trading, selling, offering or advertising of binary options.
A public consultation for the proposal was held across Canada’s provinces and was recently concluded. Based on a media outlet, much of the opinions received so far want modifications such as allowing registered companies to offer such services or permitting some kind of binary options, instead of a flat out ban.
AMF, the securities regulator for the province of Quebec has been releasing some of the feedback gathered from the consultation. Comments from the Canadian Advocacy Council for Canadian CFA Institute Societies (the CAC) stand out in particular as they highlight a widely different view point from others.
The body which consists of investment professionals like portfolio managers and analysts has expressed its full support for the ban on binary options. The CAC said that binary options are being used to cheat lay persons of large sums of money with no possibility of recovery.
Going beyond the scope of binary options, the CAC has also expressed concern regarding leveraged foreign exchange over-the- counter products which in its opinion could cause similar issues. The CAC has also raised a query whether they should also be banned.
The CAC has pointed out that it was important to consider the treatment of all similar instruments to ensure that there was clarity in the market. It highlighted an earlier Staff Notice issued by the Ontario Securities Commission (OSC) which had emphasized that companies dealing in transactions related to foreign exchange contracts must be registered, but no further action was taken.
The move to ban binary options has come after regulators received 800 complaints regarding binary options fraud last year alone, despite the fact that there was no company registered in Canada who was authorized to carry out this type of trading.
The CSA swung into action after securities regulators across the country observed a sharp rise in complaints of fraud related to binary options. The Manitoba Securities Commission received four complaints regarding binary options firms in 2015 which jumped to 58 in 2016 and a similar number is expected in 2017 as well a Binary Options Task Force has been set up to tackle the problem in earnest.The measures suggested by the body include asking Canadian sites to refuse hosting binary options ads and a comprehensive program to educate Canadians about the risks associated with binary options trading.
