As expected, Israel’s parliamentary committee on government oversight, the State Control Committee, has set in motion a process that would give the Israel Securities Authority (ISA) more powers to ban marketing of binary options to overseas customers. The Committee held a hearing with representatives of Israel’s justice department, State Controller and the ISA, mainly seeking to know what the authorities are doing about the binary options menace.
Although the meeting was convened to discuss the regulation of binary options industry, representatives of the industry were absent at the parliamentary committee hearing.
Binary options firms representatives absent at the hearing
The meeting came at a time when media outlets in Israel have stepped up pressure on authorities to protect unsuspecting investors from the greed of unregulated binary options firms. Binary options providers have faced various accusations, including denying withdrawal requests from the accounts they manage and failing to fully disclose to investors the risks of investing in binary options.
Although the lawmakers and the regulators agreed on nearly all matters of discussion, a disagreement emerged on whether banning marketing of binary options to international customers could cause problems with regulators in other countries. Given that the idea of giving ISA more powers to pursue binary options brokers abroad is unprecedented, representatives of the justice department explained that more time will be required to carefully study the proposal and draft the law in a manner that avoids infringing on the jurisdiction of overseas regulators.
Better lose tax revenue than dent the country’s regulation
Ahead of the parliamentary committee hearing on binary options, some analysts had raised questions of whether banning binary options trading would deny Israel the tax revenue it needs. That matter came after it was found that binary options and related trades supplied $1.3 billion in taxes to Israel in 2016. Additionally, the industry employs hundreds of workers and those jobs would be lost if the government continues to put pressure on binary options brokers through stringent regulations.
However, it seems the lawmakers and financial regulators in Israel believe that a loss of revenue is better than the embarrassment that unscrupulous binary options firms have caused Israel by scamming their clients domestically and internationally.
Clamping down on binary options firms
The ISA has been collaborating with counterparts in the U.S. and other European Union countries to clampdown on binary options firms as it awaits revision of domestic securities laws to allow it extend the ban on binary options trading activities to overseas.
The Committee asked the justice department to work on a draft law that would allow the ISA to ban marketing of binary options abroad without infringing on the authority of other regulators. The draft regulation is expected in the coming weeks. The Committee has convened another meeting for next month to discuss the progress on the draft securities law.
Payments processors such as Visa and MasterCard have also joined the war against unregulated binary options firms. The payment card companies are blocking deposits to binary options brokers operating in countries where the activity is outlawed. In Belgium, the government has banned all binary options trading activities, while in France the regulator has banned advertising of binary options products and barred binary options firms from sponsoring sports in the country.