Financial regulatory authorities in the United Kingdom, in much the same way as regulatory bodies in other countries, have found it very difficult to effectively combat financial fraud related to binary options trading. Furthermore, the realization of this growing problem is occurring at the same time as a marked increase in reports of binary trading related fraud.
The National Fraud Intelligence Bureau (NFIB), a division of the City of London Police, reports receiving, on average, at least one binary options scam complaint every day.
Unique Problems of Regulating Binary Trading
Problems with binary trading in the UK include the fact that many of the brokerage firms involved are not regulated by the UK’s Financial Conduct Authority (FCA). Therefore, an investor may face the surprising and disheartening prospect of reporting an investment fraud, only to learn that the firm involved is not even under the FCA’s authority.
This situation can arise due to the peculiar nature of binary options trading. Because binary options trades are effectively “win” or “lose” bets, a number of binary trading platforms fall under the purview of the Gambling Commission rather than that of the FCA. And unless the firm actually has gambling equipment housed and operating in the UK, it is not regulated by the Gambling Commission either.
The situation is further complicated by the fact that many of the firms involved are not UK-based companies, but rather are headquartered abroad.
Problems with binary trading in the UK include the fact that many of the brokerage firms involved are not regulated by the UK’s Financial Conduct Authority (FCA).
An Alarming Trend
An alarming trend that has developed over the past few years is the increasing number of binary options related cases of outright financial fraud. That is, ever larger numbers of cases exist where investors aren’t simply facing the usual high levels of risk inherent in binary options trading, but are depositing money with companies that simply take the money and never even execute any trades for the investor.
Often, investors are presented with fraudulent documentation that appears to show them making a high return on their investments, when in fact no investments have been made at all. The phony profit reports are an inducement designed to get the investor to deposit more and more money. It is only when an investor eventually seeks to make a substantial withdrawal – and the withdrawal request is denied, along with the brokerage firm cutting off contact with the investor and refusing to respond to repeated inquiries and attempts by the investor to get his or her money back – that the victim of the fraud realizes they’ve been duped.
At particular risk are pensioners who are often specifically targeted by the perpetrators of such frauds. Many pensioners have lost all or nearly all of their pension funds to such shameless scam artists. And if it turns out the firm is not regulated by the FCA, then the unfortunate victim of fraud has little recourse in seeking to recover their lost investment funds.
What The FCA is Doing
The FCA has is striving to increase public awareness to inform investors and help educate them regarding the risks associated with trading binary options, and new regulations will bring online gambling platforms under the control of the FCA beginning in January of next year. The problem yet remains that many trading firms are operating unlicensed – and therefore unregulated – by the FCA.
Financial relief is sometimes obtained for an investor when the trading firm’s bank is willing to cooperate and threatens to freeze the firm’s financial assets unless the firm makes restitution to a wronged investor.
Investors can also contact the Financial Ombudsman Service (FOS), a body specifically established to assist investors in solving problems they encounter with financial services companies.