| TEL AVIV
TEL AVIV Feb 23 The Israeli government has
drafted a law banning the sale of binary options overseas by
online trading firms based in Israel, a business that has drawn
broad international criticism over allegations of illicit
The proposed amendment to the country's securities law was
drawn up by the securities authority and other government
offices, the Finance Ministry said on Thursday.
The draft law also goes a step farther, prohibiting any type
of trading forum that sells to overseas clients - even if they
do not offer binary options - without receiving a licence from
the country where clients reside.
Breaking the law will be punishable by up to two years in
prison and other sanctions.
Binary options involve placing a bet on whether the value of
a financial asset - a currency, a commodity or a stock - will
rise or fall in a fixed timeframe, sometimes as short as a
minute. More than 100 operators are estimated to be based in
The fast-growing industry sells itself as a legitimate
investment, but clients of some of the firms say they are little
more than high-pressure scams. They accuse the companies of
transferring money between accounts without approval and in some
cases of preventing them from withdrawing their own funds.
The Israel Securities Authority in March became the world's
first regulator to prohibit the risky transactions from being
offered domestically. Late last year its chairman, Shmuel
Hauser, asked the attorney general to consider amending the law
to give him power to target groups marketing them abroad as
A Reuters special report published in September shed light
on the extent of the industry and accusations by London-based
lawyers who say hundreds of their clients were duped out of vast
sums of money by some Israeli firms.
"Over the past year, law enforcement agents, including the
Securities Authority, have received numerous and serious
complaints regarding financial losses of clients in countries
around the world as a result of trading on Israeli forums
operating without supervision and licenses," the ministry said.
An amendment requires parliamentary approval.
A parliamentary committee that oversees government is due to
meet next week to discuss the controversial online trading
After numerous complaints, Hauser banned the online trading
firms from selling binary options to Israelis, but said he did
not have the authority to prevent them from marketing overseas.
In November Hauser told Reuters he was working with
authorities in the United States, Britain, France and Belgium to
investigate complaints against Israeli firms selling binary
Despite the ban on selling to Israelis, several of the
biggest binary options businesses are either run from Israel
with Israeli technology, sales and support staff, or are
registered to Israeli citizens.
(Editing by Alison Williams)