Fans of the 1987 movie “Wall Street” will remember that junior stockbroker Bud Fox was told by corporate raider/scammer Gordon Gekko that he should use the identifier “Blue Horseshoe loves Anacott Steel” when he called the fictional Wall Street Chronicle to manipulate reporters on Gekko’s behalf. Unfortunately, the stocks-investment scammers whom consumer investors might encounter today identify themselves just as deceptively, and when they do, they might tell you that they “love binary options.”
Binary options are legitimate investment products that often are associated with commodities. According to Owen Donley, who is the chief counsel for Office of Investor Education and Advocacy, Securities and Exchange Commission, the phrase “binary option” is “certainly out there now in sort of a loud way” as fraudsters use those words to feign legitimacy.
Consumers Digest spoke with Donley on the heels of SEC’s launch of a series of public-service announcements to increase consumer investors’ awareness of the fraud that’s perpetrated in the stocks-investment realm.
“There are not a lot of reasons that retail investors would be buying [binary options],” Donley says. “They’re often used as a hedge in the commodities space.”
Donley tells Consumers Digest that other red-flag phrases that you should know are “guaranteed high rates of return,” “double your return in 6 months” and “you have to act now.” Regarding the latter, Donley says, “There are so few retail-facing investments that [individual] investors have to make a quick decision about that are legitimate. Anybody that says, ‘You have to buy right now’ is probably not telling you the whole story.”
Donley urges investors to go to investor.gov to help them to get their arms around whether a broker who approaches them is legitimate. “We provide a database, as does a group called FINRA (Financial Industry Regulatory Authority), that you can [use] to do a background check on any financial professional who is licensed. For purposes of antifraud, it’s very important that people deal with a licensed person.” Don’t find that person in the database? He or she isn’t licensed? Not legitimate. Sorry, all of you Gordon Gekkos out there, greed isn't good.