The Financial Industry Regulatory Authority (FINRA), the self-regulatory
organization that oversees brokerages firms, issued an Investor Alert
last week warning investors about the significant risks posed by trading
A binary option is a type of option in which the payoff can take only two
possible outcomes, either some fixed monetary amount (or a precise predefined
quantity or units of some asset) or nothing at all. Because of this “all-or-nothing”
situation, a binary option can expire with an investor either making the
pre-determined amount of money or nothing at all. In addition, FINRA cautions
investors that trading binary options is even riskier given the prevalence
of fraudulent schemes often originating from foreign countries.
The Investor Alert suggests that prior to investing in a binary option,
investors take precautions in order to limit the risk of fraud. These
actions include checking the broker through a FINRA BrokerCheck® to
view background information on a financial institution, investment adviser,
or broker-dealer. This allows you to check for any history of customer
complaints and regulatory actions against the broker and their firm.
Another resource is the Commodity Futures Trading Commission’s (CFTC)
website, which can be used to determine if the binary options trading
platform is one of only three designated contract markets.
Additionally, the EDGAR system offered by the SEC can be used to see if
the trading platform has registered the sale and offer of the product
with the SEC.
FINRA states that if you are unable to find the necessary information to
verify the validity of the binary option trading platform, the broker,
the product, or the financial institution, you should not invest your
money or provide personal information.
If you have invested in a binary option and lost your entire investment,
you may have a case for securities fraud or other misconduct. Call Meyer
Wilson today for your
free case evaluation.