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Ask the Expert: Why you must avoid this investment offer in the UK

PUBLISHED: 06:00 17 November 2019 | UPDATED: 08:54 18 November 2019

Carl Lamb warns our reader off investing in binary investments. Picture: Getty Images/iStockphoto

Carl Lamb warns our reader off investing in binary investments. Picture: Getty Images/iStockphoto

Getty Images/iStockphoto

This week our reader has been offered a binary option invetment. Carl Lamb, director at Smith and Pinching, warns them off it.

Carl Lamb, director of Smith and Pinching.Carl Lamb, director of Smith and Pinching.

Reader question:

I've been sent an email by a London firm of investment advisers offering me the chance to invest in a binary option which, if it comes off, will give me a considerable payback on my money.

I understand that these types of investment are high risk and I might lose my money, but I'm willing to risk a few thousand for the chance of the possible return if it goes well.

What do you think?

Carl Lamb response:

The most important thing for you to know is that the sale of binary options by UK advice firms has been banned since April this year.

This is because the Financial Conduct Authority (FCA) deems them to be unsuitable for the UK financial retail market.

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As a result, if you are being offered binary options, then it is probably an attempt to defraud you.

The FCA warns that you should be wary of such scams.

The firm involved may well be based overseas and quote a "London office" address, but if they are claiming to be a regulated UK advice firm, they are probably lying... You can check if a firm is genuine by searching the FCA Register and by only using the contact information provided within their listing on the Register, to ensure they are not pretending to be a real regulated firm.

You can report the firm involved to the FCA using the reporting form on their website (fca.org.uk) or by phoning their Consumer Helpline.

Binary options were never a suitable investment choice for the vast majority of investors and the FCA believes that they have caused considerable investor harm.

They worked using a form of fixed-odds betting, with the investor taking a gamble on a specific financial outcome. If the guess is right, the investor - in theory - wins and sees a return on the investment. If it's wrong, the investor loses their money.

You could benefit from a proper review of your investment strategy so that you can make informed decisions about what investment risk you might take and what potential returns can be achieved.

An independent financial adviser will help you identify all the suitable options that are approved for the UK market under FCA regulation and will keep you safe from scammers.

Any opinions expressed in this article do not constitute advice.

The value of your investment can go down as well as up and you may get back less than the amount invested.

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