The Autorité des marchés financiers (AMF) is proposing draft rules that would amend derivatives regulations to formally prohibit the offering of binary options to investors in Quebec.
Regulators have warned investors repeatedly against trading in these instruments, which are often likened more to gambling than investing, and typically involve dealing with unregistered, offshore firms, which pose their risks to investors.
“Binary option platforms generally promise fast profits, which are not paid out to investors. They’re run by people who are acting illegally and embezzling victims’ funds,” says Louis Morisset, president and CEO of the AMF, in a statement. “We are committed to rigorously and proactively enforcing the prohibition. In doing so, we are taking a leadership role in the global push by regulators and financial institutions intent on protecting the public.”
The proposals, which are out for a 30-day comment period, would prohibit binary options that expire in less than 30 days. In addition to a formal ban on binary options, the AMF says the draft rules also contain measures concerning the identification of hedgers and the delivery of financial statements.
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