On September 28, 2017, the Canadian Securities Administrators (“CSA”) announced the implementation of Multilateral Instrument 91-102 Prohibition of Binary Options (“MI 91-102” or the “Instrument”) and the Companion Policy 91-102 Prohibition of Binary Options (“CP 91-102” or the “Companion Policy”), which makes it illegal to advertise, offer, sell or otherwise trade binary options shorter than 30 days with any individual. MI 91-102 is scheduled to come into effect on December 12, 2017 in all Canadian jurisdictions except British Columbia.

The purpose of MI 91-102 according to the CSA is to protect investors from becoming victims of binary options fraud and from an illegal promotion of extremely high-risk products. To this end, the Instrument and its Companion Policy explicitly prohibits advertising, offering, selling or otherwise trading a binary option with or to an individual. CSA staff identified binary options as the leading type of investment fraud facing Canadian investors.

Binary options take the form of a wager in which investors bet on the performance of an underlying asset, often a currency, stock index, or share, and the timeframe on this bet is typically very short, sometimes hours or even minutes. When the ‘investment’ period is up, the investor receives a predetermined payout or loses the entire amount.

Binary options “traders” rely on websites and social media ads to market their product, which makes it difficult to determine their location. The firms and individuals involved in the operation of binary options trading platforms are often located overseas. Investing offshore is a common red flag of fraud, as it may be impossible for investors to get their money back if something goes wrong.

According to the CSA the overwhelming majority of binary options sites are “rigged and the entire interaction takes place for the purpose of defrauding investors. Binary options are sometimes marketed under other names, including “all-or-nothing options,” “asset-or-nothing options,” “bet options,” “cash-or-nothing options,” “digital options,” “fixed-return options,” and “one-touch options.”

CSA staff advise anyone who has invested with, or has concerns about, an offshore binary options trading platform should immediately contact their local securities regulator. For more information on binary options fraud, and tips on how investors can protect themselves, please visit http://www.binaryoptionsfraud.ca/.

Multilateral Instrument 91-102 Prohibition of Binary Options and the Companion Policy are available for download from the websites of participating member jurisdictions. The British Columbia Securities Commission (BCSC) is not an authority implementing the Binary Options Rule. BC Notice 2017/02 – Binary Options, which discusses the regulation of binary options in British Columbia, is available for download from the website of the BCSC.

For more information, please call Barbara Hendrickson at BAX Securities Law (416) 601 -1004.

This publication is not intended to constitute legal advice. No one should act on it or refrain from acting on it without consulting with a lawyer. BAX does not warrant or guarantee the accuracy or currency or completeness of the publication. No part of this publication may be reproduced without the prior written permission of BAX Securities Law.