The parent company of Binary Options brokers EZTrader, EZinvest.com, and EZInvest-sec.jp has received a penalty. The US SEC fines EZTD Inc. for misleading its clients. How were the investors misled?
11 November, AtoZForex – The US Securities and Exchange Commission (SEC) has imposed charges in the amount of $1.7 million on EZTD Inc due to misleading investors into trading binary options before January 2014. The company revealed the fine several months ago. EZTD Inc runs three binary options brands, including EZTrader.com, EZinvest.com, and EZInvest-sec.jp.
SEC fines EZTD
The US regulator fined the company as EZTD Inc failed to register as a broker-dealer to legally offer instruments to US clients. In addition, the brokerage did not reveal the risks of loss appropriately. Instead, EZTD was making statements about the high profitability of binary options trading. The brokerage addressed it as a 'highly profitable trading platform' and 'an extremely lucrative avenue for individuals who are looking to see an increase in income.'
Furthermore, the SEC found out that less than 3 percent of around 4,000 US investors who opened accounts with EZTD Inc were able to make any profits. Hence, the brokerage has to pay back $1.5 million in revenues received from US clients and a fine of $200,000. EZTD does not sell binary options in the US anymore.
SEC's Directors comments and precautions
According to SEC's Deputy Director of Enforcement division, Stephanie Avakian, profits of EZTD were mainly coming from client trading losses. Whereas, the company was still stressing the profitability of trading in binary options.
"Companies dealing in binary options must disclose more than general statements about investment risk so investors in these instruments understand that the odds are stacked against them."
Additionally, Lori Schock, SEC's Director of Investor Education and Advocacy Office, mentioned that the regulator is still getting complaints from US investors related to binary options websites. Mr. Schock warns that if traders experience difficulties withdrawing money from an online binary options trading platform,they could be victims of a fraud and, thus, should not deposit any more money with the platform.
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