Binary options brokers are usually operating in a shady regulation environment and often walk the thin line of lawlessness. They are advertised as a fast way of earning easy money, without having any previous investment and trading experience – just by clicking with the mouse. But first you have to send the brokers your hard-earned money. The sad tales of people losing their life’s savings abound. The national regulators issue warnings and are making efforts to curb and regulate the binary options brokers’ activities, but often to no avail.
Revocation of licenses is one of the main tools of regulators to bring to heel the binary options brokers, though the lack of license has never stopped the companies from doing business and profiteering. – The warnings about unregulated binary options brokers pile up on a weekly basis and usually the offenders are the same. They change names, locations, or sometimes don’t even bother to pretend they are a different company. The gullible and greedy abound and as long as they exist, someone will find a way to take their money.
Another, probably more effective tool in disciplining the binary options brokers, are the fines. The major regulators are not shy of slapping big fines on the offenders as a punishment for violating the law. The sums vary, generally depending on the seriousness of the violations, but also on who’s imposing them. It seems that the US regulators are merciless and seek sums ranging in the millions, while the other regulators are more humble.
SMN has looked at the largest fines imposed on binary options brokers this year so far.
Banc de Binary – $11 million
The unarguable “champion” is one of the major and oldest binary options brokers Banc de Binary, which just had its Belize license revoked. It has been in trouble with regulators for a while and in February reached an agreement with the US Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) to pay more than $11 million in settlement. The broker was accused of illegally targeting US residents, without having a license to do so and solicited large sums. The broker agreed to pay $7.1 million in disgorgement and restitution, $2 million in civil penalties to the CFTC and $1.95 million in SEC civil penalties. As part of the settlement agreement, Oren Laurent, the broker’s founder, had to pay $150 000.
Banc De Binary has decided on the settlement agreement after in 2013 it was sued by both the SEC and the CFTC. It has neither admitted, nor denied the US regulators’ allegations.
It seems the US regulators and courts have a taste for imposing punishing fines. In July a US court ordered the Israeli-based brokers Vault Options, Ltd. (Vault) and Global Trader 365 (GT 365) to jointly and severally pay a $3 million civil monetary penalty and $1,587,731 in restitution to their defrauded customers. The order came after in February CFTC filed a lawsuit accusing the brokers of offering off-exchange traded binary options to
US customers and defrauding them of large sums. The CFTC claimed that while operating as unregistered Futures Commission Merchants, Vault and GT 365 solicited and accepted at least $1.6 million from US customers from 22 states.
The Cyprus Securities and Exchange Commission (CySEC), which is the main regulator of the binary options brokers operating throughout the EU, also has a penchant for slapping fines, however much smaller, compared to those in the US.
In the spring CySEC slapped a €235 000 combined fine on the owner of the anyoption binary options broker – Ouroboros Derivatives Trading Ltd for non-compliance.
IQOption Europe was fined by the CySEC for violating the regulations against money laundering and terrorism financing law and the requirements for professional competence.
In August Belgium’s Financial Services and Markets Authority (FSMA) reached a €140 000 settlement with Rodeler Ltd. The owner of the binary options brokers 24Option, QuickOption and GrandOption and the 24FX forex broker had been offering trading in forex, binary options, and CFDs in Belgium without publishing a prospectus, as required by local law.
CySEC fined €138 000 OptionRally for the same offenses as IQOption – violating the money laundering and terrorism financing law and the professional competence requirements of the company staff.
In the summer CySEC slapped on the owner of the OptionFair binary options broker – TechFinancials – a combined fine of €138 000 for a number of offenses, including failure to comply with the requirements for fair advertising, informing the clients on the risks of trading and not properly assessing the competence of its clients.
The SpotOption Exchange binary options market maker was fined by the CySEC €10 000 for non-compliance with authorization conditions regarding procedures and failure to act honestly and professionally in accordance with the best interest of the clients.