FINRA Issues Investor Alert—Binary Options: These All-Or-Nothing Options Are All-Too-Often Fraudulent

WASHINGTON–(BUSINESS WIRE)–The Financial Industry Regulatory Authority (FINRA) today issued a new
Investor Alert, Binary
Options: These All-Or-Nothing Options Are All-Too-Often Fraudulent
.
FINRA published the alert to warn investors that trading binary options
can be extremely risky. Unlike other types of options contracts, binary
options are all-or-nothing propositions. When a binary option expires,
it either makes a pre-specified amount of money, or nothing at all, in
which case the investor loses the entire investment. Trading binary
options is made even riskier by fraudulent schemes, many of which
originate outside the United States.

“Calls to the FINRA
Securities Helpline for Seniors – HELPSTM
suggest that
scams involving binary options and their trading platforms are alive and
well,” said Gerri Walsh, FINRA’s Senior Vice President for Investor
Education. “Callers describe situations in which purported binary
options trading firms don’t deposit investor funds into the investor’s
account, deny requests to return funds, or require a fee be paid in
order to receive a return of their investment assets. In at least one
situation, a fraudster posing as a regulator accused the investor of
engaging in illegal binary options trading and demanded payment of a
fictitious fine.”

Senior Helpline calls suggest investors should be particularly wary of
non-U.S. companies that offer binary options trading. These include
trading applications with names that often imply an easy path to riches,
and demo accounts that allow users to try their hand at binary options
trading without risking personal assets. Such accounts can serve as bait
to lure investors into sending money to fund a “real” trading account,
or open the door to identity theft, by requesting an array of personal
information.

Binary Options recommends investors take the following
precautions before investing in binary options:

  • Use FINRA’s
    BrokerCheck®
    and the National Futures Association’s Background
    Affiliation Status Information Center (BASIC)
    to check the
    registration status and background of any firm or financial
    professional that you are considering.
  • Check the CFTC’s
    website
    to see if the binary options trading platform is a
    designated contract market—currently there are only three such markets
    offering binary options.
  • Use the SEC’s EDGAR
    system to check to see if the binary options trading platform has
    registered the offer and sale of the product with the SEC.
  • Check the SEC’s website
    regarding exchanges
    to determine if the binary options trading
    platform is registered as an exchange.

FINRA’s alert cautions that unless you can verify the registration
status of the trading platform, products, firms and financial
professionals, do not trade with them, do not send any money, and do not
provide your personal information.

FINRA, the Financial Industry Regulatory Authority, is the largest
independent regulator for all securities firms doing business in the
United States. FINRA is dedicated to investor protection and market
integrity through effective and efficient regulation and complementary
compliance and technology-based services. FINRA touches virtually every
aspect of the securities business – from registering and educating all
industry participants to examining securities firms, writing rules,
enforcing those rules and the federal securities laws, and informing and
educating the investing public. In addition, FINRA provides surveillance
and other regulatory services for equities and options markets, as well
as trade reporting and other industry utilities. FINRA also administers
the largest dispute resolution forum for investors and firms. For more
information, please visit www.finra.org.

Contacts

Financial Industry Regulatory Authority (FINRA)
Ray
Pellecchia
, 212-858-4387