Montréal - The Autorité des marchés financiers (the "AMF") is urging investors to be cautious about Banc de Binary, a firm headquartered in Cyprus that offers an Internet-based trading platform for binary options.
Banc de Binary is not registered with the AMF and does not rely on any exemption which would allow it to solicit investors in Québec. To date, the AMF has received at least one complaint from a Québec investor who traded through Banc de Binary's platform and was unable to recover his investment. It should be noted that Banc de Binary does not specifically mention, solicit or target Québec investors.
To entice Internet users to open an account, Banc de Binary offers a 50% bonus on their initial account deposit. However, under the account contract, by accepting the bonus, the client can only withdraw his investment when the total value of his trades is 20 times the value of his account opening deposit.
The Ontario Securities Commission placed Banc de Binary on its Warning List This link will open in a new window in October 2012, and the U.S. Commodity Futures Trading Commission filed a civil complaint This link will open in a new window against Banc de Binary in June 2013, charging it with violating U.S. law by soliciting U.S. citizens and operating as an unregistered Futures Commission Merchant (FCM).
Binary options - "All or nothing" options
Binary options are a type of option where the investor faces two possible outcomes when his investment matures: either he receives a pre-determined cash payout (often called the "premium") or he loses his investment, hence the term "all or nothing">options. Binary options are often traded in the currency markets.
For example, a trader might predict that the Canadian dollar will close higher than the U.S. dollar. Therefore, he will buy a $100 binary call option in order to profit from this possible rise in price. Another trader, however, might predict that the closing price will be lower. Therefore, he will buy a $100 binary put option. When the option expires, if the Canadian dollar closes above the U.S. dollar, the first trader, who predicted a rise in price, will recover his $100 investment plus a pre-determined fixed amount (e.g., a premium of 80%, or $80). Therefore, $180 will be credited to his account. As for the second trader, who predicted a drop in price, he loses his entire investment.
The AMF cautions Québec investors about fraudulent schemes involving binary options and their trading platforms. The consequences of these schemes can include blocked access to accounts, refusal to refund investments, identity theft and the manipulation of software to generate losing trades.
Don't become a victim of fraud
The currency market is complex and volatile. It is intended for investors who have the knowledge, time and resources to track it. Investors who do not have the knowledge and time needed to trade in this market could incur significant losses.
Whether on the Internet or in person, offering investments is a regulated activity. The person or company asking for your money must be registered with the AMF. To make sure that you don't become a victim, check the Register of firms and individuals authorized to practise.
If you think you have detected or been the target of a scam, do not hesitate to contact the Information Centre. Your information could help the AMF better protect consumers.
Visit the AMF website to learn about other ways to prevent fraud.
The Autorité des marchés financiers (the "AMF") is the regulatory and oversight body for Québec's financial sector.
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