The unregistered firms are alleged to have sold binary options to Ontario investors.
The Ontario Securities Commission (OSC) has issued a notice of hearing and statement of allegations alleging several offshore firms have been involved with providing unregistered binary options trading to Canadian investors.
The allegations against OptionRally, TCM Investments Ltd. (TCM), LFG Investments Ltd. (LFG), AD Partners Solutions Ltd. (AD) and InterCapital SM Ltd. have not been proven. The first hearing in the case is set for Sept. 26.
According to the statement of allegations, "OptionRally engaged in activities similar to a registrant. It intermediated trades and directly solicited securities transactions. OptionRally carried out this activity with regularity and was compensated by investors."
The OSC's statement also alleges that the various other firms (TCM, LFG, AD and InterCapital) conducted acts in furtherance of trades.
"None of these entities was registered to trade securities in Ontario and none of these entities filed a prospectus with the commission," the statement says.
TCM, which operates OptionRally in Belize, is based in the United Kingdom. LFG previously operated OptionRally. InterCapital is also based in the U.K. and acts as a "servicing company" for OptionRally; AD is located in the United Arab Emirates. The firms have all been placed on the OSC's warning list in the past.
The OSC's statement indicates that since OptionRally was put on the regulator's warning list in 2014, the OSC has received over 30 complaints or enquiries regarding the firm, including 20 complainants who confirm that they invested an aggregate of $300,000 with OptionRally. The firm now stands accused of trading without registration and distributing securities without a prospectus.
The enforcement action comes as regulators are stepping up their efforts against illegal binary options trading in Canada amid growing investor complaints. The Canadian Securities Administrators is currently considering a proposed new rule that would formally outlaw advertising, offering, and trading in, binary options by retail investors.