Find out how binary options work, how to avoid scams and what to do if you are scammed.
UK consumers are being increasingly targeted by binary options investment scams.
Binary options are a form of fixed-odds betting.
Typically a trade involves whether an event will happen or not (for example, will the price of a particular share or asset go up) and the outcome is either yes or no.
If the investor is correct, they ‘win’ and should see a return on their investment; if they’re wrong, they lose their full investment.
On 3 January 2018 binary options became a regulated investment product.
If you choose to trade in binary options you should use an FCA authorised firm. If you use an unauthorised firm you will be more at risk of a scam and won’t have access to the Financial Ombudsman Service or Financial Services Compensation Scheme (FSCS) if things go wrong.
We have published a list of firms without FCA authorisation that we understand to be offering binary options trading to UK consumers.
How binary options scams work
Binary options fraudsters often advertise on social media – the ads link to websites that are well-designed and professional looking.
The firms operating the scams tend to be based outside the UK but often claim to have a UK presence, often a prestigious City of London address.
Scam firms may manipulate software to distort prices and payouts – they then suddenly close consumers’ trading accounts, refusing to pay back their money.
How to protect yourself
Be wary of adverts online and on social media promising high returns from binary options trading.
You should check the firm isn’t a clone firm by asking for their firm reference number (FRN) and contact details and then calling them back on the switchboard number on our Register – never use a link in an email or website from the firm offering you an investment.
Always be wary if you’re contacted out of the blue, pressured to invest quickly or promised returns that sound too good to be true.
You should seriously consider seeking financial advice or guidance before investing. You should make sure that any firm you deal with is regulated by us and never take investment advice from the company that contacted you, as this may be part of the scam.
Read more about how to find an adviser.
If you have been scammed
If you have already invested in a scam, fraudsters are likely to target you again or sell your details to other criminals.
The follow-up scam may be completely separate or related to the previous fraud, such as an offer to get your money back or to buy back the investment after you pay a fee.
If you have any concerns at all about a potential scam, contact us immediately.