Binary options are a trading mechanism that have taken many governmental agencies by surprise. The reason for this is that, in many cases, they appeared out of thin air. Due to the wide variety of financial transactions that are appearing on the Internet, it has become increasingly difficult in order to regulate how consumers can be protected. One of the pioneers of binary options protection to consumers has been the United States. The Securities and Exchange Commission (SEC) is the governmental agency that protects consumers from fraud circumstances of this nature. Due to the influx of fraud in the financial trading sector, the SEC has subsequently created the CFTC in order to handle regulation and recommendations with the objective of protecting Americans consumers that have fallen prey to many unfortunate investment schemes.
The CFTC’s Role
The Commodities Futures Trading Commission’s Office of Consumer Outreach (CFTC) issues warnings regarding fraudulent schemes that involve binary options and their various, yet diverse, trading platforms. Many of these schemes have historically refused to credit the consumer’s accounts, have withheld fund reimbursement, identity theft, and the tampering with software to generate more losing trades than winning ones. On a regular basis, the CFTC issues a report and warnings regarding the latest in fraud in the financial sector. Some of the most typical recommendations that are reported to the CFTC are mentioned below.
Recommendations from the CFTC
- Remember that Many Binary Trading Platforms Do Not Follow U.S Regulations: This is a pivotal point to consider as many of these platforms are foreign-owned and do not have the obligation to follow U.S. standards. For this reason, they may be engaging in illegal activity due to their lack of regulation in their home jurisdiction.
- Do Not Invest in a Trading Platform that You Cannot Understand: As a general rule of thumb, if you do not understand the nature of the investment that you are making, then you should not be making it. This is also true if you are working with a broker. If the broker cannot adequately explain the investment to you, then you best be investing elsewhere. This invites itself to fraud by lack of knowledge.
- Take the Following Precautions Before Investing in Binary Options:
- Verify that the Binary Trading Platform is Registered with the SEC: The SEC has a platform that is called EDGAR. Here, you will be able to verify whether the binary trading platform is registered with the SEC and has to follow their regulations.
- Ascertain Whether the Binary Options Trading Platform is Registered as an Exchange: The SEC has a website that is dedicated to verifying whether binary options trading platforms have been registered as exchanges. Check this website with diligence.
- Make Sure the Binary Options Trading Platform is a Designated Contract Market: In order to figure out whether the binary options trading platform is a designated contract, be sure to check CFTC’s website. This will also help you to assess whether the platform is complying with U.S. regulations.
- Use the Appropriate Broker Index for a Final Check: There are several ways to check the broker involved in the trade such as: FINRA”s BrokerCheck, National Futures Association’s Background Affiliation Status Information Center (BASIC). Using these resources will help to established whether the broker you are working with is legitimate before you decide to invest.
When Spotting Fraud
If you believe you have been the victim of fraud in the binary options market, please contact Silver Law Group for a free consultation at ssilver@silverlaw.com or toll free at (800) 975-4345.