Client protection has been preying a lot on the mind of the US Commodity Futures Trading Commission (CFTC) lately. The latest company to be found in violation of regulator's rules is binary options
broker Banc de Binary
. After a two-year investigation, the Commission has charged the broker with three transgressions: accepting clients from the US, operating as an unregistered Futures Commission Merchant (FCM) and accepting customers without checking their net worth or trading history.
Binary options trading is not technically illegal in the US, though it is only allowed on regulated exchanges. The CFTC's requirements are quite definite, stating that only designated contract markets or boards of trade are acceptable. Any US customer wishing to trade in binary options must have a net worth of over $5 million per year. So far, the only entity that has met these requirements is the North American Derivatives Exchange, Inc. There is a provision in the rules for companies wishing to work with clients of lower net worth – they must first register as an FCM.
In light of the current situation, the CFTC has come out with a Fraud Advisory for customers, explaining the risks of trading binary options with an unlicensed entity. Their concerns deal with complaints already received from clients of brokers offering binary options trading platforms. These include false advertising, refusal of withdrawals, even possibility of identity theft in cases when a broker requests identification or credit card copies. While these are all completely valid points, I personally am slightly confused when it comes to the Banc de Binary case in particular. The broker did apply
for a CFTC license earlier this year, but was turned down. At that point, they were forbidden to accept any new US clients, but were told previously registered accounts would be allowed full access to the broker's service. So, why not make a case right then and there? The CFTC investigation was started two years ago, in May 2011. Banc de Binary applying for a license and openly admitting it was offering binary options to US citizens without a license was as good as a written and signed confession. Was this perhaps the final touch needed to close the investigation?
Of course, it is possible that Banc de Binary's applying for a license was a much belated attempt to set things right. If that is indeed the case, the CFTC was not fooled. Though there is no information at the moment what repercussions the broker may face, it's very likely the Commission's justice will be swift and painful.
About Banc de Binary
Banc de Binary is a privately held trading and investment firm operating out of the USA, regulated by CySEC. The broker's binary option services are powered by SpotOption – one of the largest binary options platform providers. It allows trading in a number of option types: Digital Options Pro, the Option Builder, the One Touch Platform, the 60 Second trading platform, and BinaryMETA.