Managed Accounts & Dodgy Claims
Unfortunately I get a steady correspondence concerning claims about binary options sharks managed accounts and dodgy claims. It is unusual when a salesperson of a broker approaches me to ask about the legal implications of a broker offering a managed account. I was also alerted to a ludicrous claim from a broker, unfortunately a broker with CySec regulation, which is highlighted below.
If an on-line sports bookmaker offered to open an account for you with the proposition that they will choose your bets for you then you would probably laugh at them. The concept of a managed account whereby the ‘house’ chooses bets for the client which the ‘house’ takes the other side is so obviously open to abuse as to make it a non-starter for any client with an IQ of over 5. Yet these managed accounts appear to have some fatal attraction to the mug-punters that are targeted by unscrupulous brokers. To illustrate this consider a broker who calls and advises to bet one way or another on a football match. If the broker is correct then the client wins and the ‘house’ which pays the broker’s salary loses. Now when I last looked, turkeys do NOT vote for Christmas, i.e. if the broker consistently calls the market right to the benefit of the client then guess what……the broker will get fired.
This assumes that the broker let’s the client know what bet he’s about to take before the football match kicks off. But suppose the broker only informs the client about what bets he placed AFTER the event has finished and the result is known. At this point the client has to have faith that the broker actually did place the bet prior to the game starting and not after the result is known. This is a big ask and when these brokers are paid on a commission basis the temptation will be to stuff the client with losing bets.
This is the current position in the binary options market: market ignorant brokers with zero experience of trading are somehow given permission to trade for a client. If the client wins consistently the broker gets sacked. If the client does not lose enough the broker does not get commission. In effect, and leave aside the fact that nearly all these brokers are not qualified to advise clients on their trading, there is a vast incentive to get the client lose.
Managed Accounts Regulation
Any responsible regulator will ensure that a ‘broking’ operation, and I use the term ‘broking’ loosely as these operations are not brokers but position takers, that a brooking operation simply can not provide managed accounts. With the UK FCA entering the fray next year this practice will be outlawed, it will be made illegal. Any broker attempting to be ‘Grandmothered’ onto the FCA’s regulatory books will find themselves being banned from offering their product to the UK. Will it end there? Nope. Offshore regulators will be embarrassed into banning this practice from those operators they regulate now in order to ensure regulatory arbitrage is ruled out otherwise their license will become worthless leading to operators being forced to go to onshore regulators for their license. Binary options brokers do NOT get regulated to help out their clients, they get regulated as part of their credibility building marketing.
DO NOT BE GULLED INTO OPENING A MANAGED ACCOUNT. THEY ARE BENT?
Binary Options Dodgy Claims
Today it has been brought to my attention that 24Option sent out this:
“I don’t want to waste anymore time Every person that has seen this has gone on to make thousands within 24 hours….”
and then provides two links which I did not fancy opening on the basis that they could have some marketing virus built into them.
Forget the content for a moment: the illiterate nature of the message should immediately place the recipient on guard because no professional of any standing would send out a message so lacking in credibility.
The content: the sentence beginning ‘Every’, and yet again I use the word ‘sentence’ very loosely, is quite frankly such a ludicrous claim as to totally discredit 24Option. Do 24Option not have a compliance officer that vets this sort of disgraceful marketing? What is CySEC’s attitude to this text message? What do Juventus think about this, after all 24Option have a commercial relationship with them?
IF YOU RECEIVE ANY CORRESPONDENCE OF THIS NATURE FROM A BROKER THEN RUN!
CySEC bravely stood up to the need to regulate binary options as an investment and all those of us that have a vested interest in the success applaud their stand. Recently CySEC have targeted FX brokers such as IronFX when tightening their regulation. CySEC need to start focusing on the dodgy marketing practices of brokers under their regulatory umbrella otherwise this market will struggle to gain credibility. One can understand the frustration of the likes of Nadex who operate under the strict regime of the CFTC yet watch the nefarious activities of competitors go unaddressed by laxer regulators.
The bottom line is that the clients themselves need to wise-up!!