FCA bans sale of binary options to consumers
The FCA has permanently banned the sale of binary options to retail consumers.
Following consultation feedback, the FCA confirmed all firms acting in or from the UK have been prohibited from selling, marketing or distributing binary options to retail consumers.
The regulator says the new rules tackle widespread concerns about the inherent risks of these products, and the poor conduct of the firms selling them.
This has led to consumer harm in the UK and internationally through large and unexpected trading losses.
The FCA’s rules are in substance the same as the European Securities and Markets Authority’s (ESMA) existing, EU-wide temporary restrictions on binary options.
However, the FCA is also applying its rules to so-called ‘securitised binary options’ that were excluded from ESMA’s prohibition.
Securitised binary options are not currently sold in or from the UK.
The FCA thinks these products pose the same risks for investors and so are extending the scope of the prohibition to prevent a market developing for these products.
The rules will be permanent and will come into force on 2 April.
The watchdog estimated the ban could save retail consumers up to £17m per year, and may reduce the risk of fraud by unauthorised entities claiming to offer these products.
Christopher Woolard, executive director of strategy & competition at the FCA, said: “Binary options are gambling products dressed up as financial instruments.
“By confirming our ban today we are ensuring that investors don’t lose money from an inherently flawed product.”