These complaints typically involve customers who have deposited money into their binary options trading account and who are then encouraged by ldquobrokers over the telephone to deposit additional funds into the customer account. When customers later attempt to withdraw their original deposit or the return they have been promised, the trading platforms allegedly cancel customersrsquo withdrawal requests, refuse to credit their accounts, or ignore their telephone calls and emails.The second category of alleged fraud involves identity theft. For example, some complaints allege that certain Internet-based binary options trading platforms may be collecting customer information such as credit card and driverrsquos license data for unspecified uses. If a binary options Internet-based trading platform requests photocopies of your credit card, driverrsquos license, or other personal data, do not provide the information.The third category of alleged fraud involves the manipulation of the binary options trading software to generate losing trades. These complaints allege that the Internet-based binary options trading platforms manipulate the trading software to distort binary options prices and payouts. For example, when a customerrsquos trade is ldquowinning, the countdown to expiration is extended arbitrarily until the trade becomes a loss.In addition to ongoing fraudulent activity, many binary options trading platforms may be operating in violation of other applicable laws and regulations, including certain registration and regulatory requirements of the SEC and CFTC, as described below.For example, some binary options may be securities. Under the federal securities laws, a company may not lawfully offer or sell securities unless the offer and sale have been registered with the SEC or an exemption from such registration applies. For example, if the terms of a binary option contract provide for a specified return based on the price of a companyrsquos securities, the binary option contract is a security and may not be offered or sold without registration, unless an exemption from registration is available. If there is no registration or exemption, then the offer or sale of the binary option to you would be illegal.In addition, some binary options trading platforms may be operating as unregistered broker-dealers. A person who engages in the business of effecting securities transactions for the accounts of others in the U.S. generally must register with the SEC as a broker-dealer. If a binary options trading platform is offering to buy or sell securities, effecting transactions in securities, and/or receiving transaction-based compensation (such as commissions), it likely should be registered with the SEC. To determine whether a particular trading platform is registered with the SEC as a broker-dealer, visit the FINRA BrokerCheck website (finra.org/investors/toolscalculators/brokercheck/).Some binary options trading platforms may also be operating as unregistered securities exchanges. This would be the case if they matched orders in securities of multiple buyers and sellers using established non-discretionary methods. However, there are cases where a registered broker-dealer with a trading system or platform may legitimately have no obligation to register as an exchange.It is illegal for entities to solicit, accept offers, offer to or enter into commodity options transactions (for example, foreign currencies, metals such as gold and silver, and agricultural products such as wheat or corn) with U.S. citizens, unless those options transactions are conducted on a designated contract market, an exempt board of trade, or a bona fide foreign board of trade, or are conducted with U.S. customers who have a net worth that exceeds 5 million.To see the most recent list of exchanges that are designated as contract markets, check the CFTC website. There currently are only three designated contract markets offering binary options in the U.S.: Cantor Exchange LP Chicago Mercantile Exchange, Inc. and the North American Derivatives Exchange, Inc. All other entities offering binary options that are commodity options transactions are doing so illegally.Further, entities that solicit or accept orders for commodity options transactions and accept, among other things, money to margin, guarantee, or secure the commodity options transactions must register as a Futures Commission Merchant. Entities that act as the counterparty (that is, they take the other side of the transaction from the customer as opposed to matching orders) for foreign currency options transactions for customers with a net worth of less than 5 million must register as a Retail Foreign Exchange Dealer.EDGAR (sec.gov/edgar/searchedgar/webusers.htm)FINRA BrokerCheck (finra.org/investors/toolscalculators/brokercheck/)BASIC Search (nfa.futures.org/basicnet)SEC Publication: Ask Questions (sec.gov/investor/pubs/sec-questions-investors-should-ask.pdf)SEC Investor Alert: Social Media and InvestingmdashAvoiding Fraud (sec.gov/investor/alerts/socialmediaandfraud.pdf)CFTC Consumer Protection (CFTC.gov/consumerprotection)International Organization of Securities Commissions (IOSCO) (iosco.org/investorprotection/subsectioninvestoralertsportal)The Office of Investor Education and Advocacy has provided this information as a service to investors. It is neither a legal interpretation nor a statement of SEC policy. If you have questions concerning the meaning or application of a particular law or rule, please consult with an attorney who specializes in securities law.The spread betting industry in the UK generates nearly 1bn in revenues per year, but its appeal is limited by its complexity, says Oren Laurent, chief executive of Banc De Binary. Binary options are a simpler, fast-growing form of online options trading. They allow investors to benefit from making a straightforward choice whether the price of a share, commodity or index will go up or down.
