The crackdown on unregulated binary options firms continues as it was announced recently that the Cyprus Securities and Exchange Commission (CySEC) has fined binary options broker TDOptions.com $50,000 for coming into conflict with regulation protocols. According to CySEC, the amount has been settled in full by the company in question.
CySEC made a statement on its website (see below for full link) regarding the fine which stated that TDOptions were in breach of the Investment Services and Activities and Regulated Markets Law of 2007, article 4(1), due to its having been offering binary options trades from Cyprus until the December 31st 2012 without having an Investment Firm license from CySEC.
CySEC was the first European regulatory authority to reclassify binary options as investment services that come under its jurisdiction. It announced this reclassification on May 5th 2012 and awarded the first license to Banc de Binary at the end of the year. Since this announcement the island has a massive influx of brokers basing themselves out of the Mediterranean island and CySEC itself has been inundated with applications for a Cyprus Investment Firm (CIF) license. The island is a particularly attractive location for brokers, owing to its lower taxes, skilled workforce and high standard of living.
This fine marks the first occasion that CySEC has flexed its regulatory muscles and used its authority to pursue unregulated brokers. It comes hot on the heels of last week’s announcement that the CFTC and SEC were commencing litigation against Banc de Binary for operating unregulated in the U.S. If this action is to set a precedent we could see more action on the many other unregulated brokers currently unlicensed by CySEC. Philip Masters, our industry insider, had the following to say on the news:
“I think we’re about to see a general weeding out of the unregulated from the regulated. We saw the same thing happening several years ago in the world of online forex and this is no different as the industry moves towards legitimisation. This is definitely an interesting story to watch as it should shift the balance of power in the industry significantly if CySEC should go full-bore into pursuing unregulated brokerages. Last year being regulated put you at a disadvantage, it meant additional costs associated with being fully compliant with regulation, it meant imposing certain standards and practices that unregulated brokers don’t have to worry about, it tipped the balance in favour of the unregulated who could profit more and extend their brand’s reach further into the market. We’ve seen unregulated brokers rising to the very top of the industry in early 2013. If CySEC are serious about enforcing the letter of the law it could be the death-blow for many brokerages. Realistically speaking though the smaller ones who can’t afford to go on that lengthy regulatory journey will go under, and the big boys who can afford it will just suck it up and take the cost. Still it’s a fascinating plot point in the binary options story. I’d stay posted if I were you.”
CySEC Announcement: http://www.cysec.gov.cy/Downloads/English/Announcements/2013/General/Announcement%2006%2014%20%202013%20regarding%20settlement%20reached%20with%20TDO%20Consulting%20Ltd.pdf
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