News

SEC Levies Massive Fine on Binary Options Broker EZTD

November 15, 2016

The US Securities and Exchange Commission levied a major penalty against binary options firm EZTD over the company’s provision of services to American customers. The regulator alleges that the company offered its services in the US despite being unauthorized and not having any sort of license to provide brokerage or investment advisory services. Additionally, the SEC claims that EZTD deliberately obfuscated facts about the industry to lure more customers.

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The SEC has been vigilant in keeping unregulated brokers from its borders thanks to a strong mandate to enforce penalties alongside clear guidelines and protocols. The fine is the second such penalty for a foreign binary options broker as US regulators step up their fight.

Recently, the Financial Industry Regulatory Authority (FINRA) released a comprehensive warning on the dangers of binary options. Many other regulatory bodies in the US are following suit, having been vigilant in dealing with unregulated brokers. The escalating war of rhetoric echoes a broader movement by regulators worldwide who have been fighting intensely to curtail the binary options industry in their countries.

EZTD Takes a Major Hit

Binary options broker and platform provider EZTD was fined by the SEC, the regulator announced on Thursday. The penalty is a result of a series of violations by the binary options firm. These included soliciting customers within US borders and understating the level of risk and potential pitfalls related to trading binary options.

EZTD—which operates several binary options websites including EZTrader.com, EZInvest.com, and Win Global Markets—said the charges and penalties stem from actions taken by the company in 2014, and not to a recent violation of compliance codes.

One of the largest problems for the SEC was the company’s predatory and aggressive marketing strategies. The financial markets watchdog announced that one of the main reasons it was taking actions was EZTD’s lack of acknowledgment of the true level of risk posed by trading binary options. While the company does have a small disclaimer, the SEC judged it was not enough.

Additionally, EZTD was accused of inflating its success stories to appear more reliable. While the company claims great success rates, the regulator found in its investigation that out of the 4,000 customers signed up by EZTD in the period under review, less than 3.00% actually reported making any profits from their investing activities.

The broker reached a settlement with the SEC that enables it to abstain from admitting guilt or wrongdoing, but requires payment of a fine totaling over $1.7 million for several reasons. The largest portion of the fine will be used to return investments to customers who were signed up, while the company will also have to pay a $200,000 penalty.

America Tightening its Borders

The action taken against EZTD marks the third in a series of high profile legal proceedings undertaken by the SEC. The regulator has been working to crackdown on the unregulated binary options market in the US. The derivative is legal in the country, but can only be traded via regulated exchanges such as NADEX or Cantor Exchange. In February, the SEC fined Banc de Binary—one of the largest binary options brokers in the world–$11.0 million over charges similar to EZTD’s. Later in 2016, Vault Options and GT 365 were jointly ordered to pay $4.5 million in total penalties relating to charges of defrauding customers.

All US Regulators (The SEC, CFTC, FINRA) have stepped up their fight against the industry, levying more fines and being much more vocal about an industry that has become the preferred target of regulators and crusaders for cleaner investment practices.