The British High Court has announced today that it has shut down binary options trader, Eclipse Finance Limited following the company’s use of aggressive marketing techniques.
According to a statement published on the United Kingdom government’s website, the court heard that Eclipse made false and misleading claims to persuade traders from around the world to invest in a bogus Binary Options scheme. The company has since been closed by the High Court on June 26, 2018.
Misleading and aggressive marketing techniques
Eclipse claimed investors would make high returns, when in fact all known investors reported significant losses, averaging over £50,000 each. Total losses reported to Action Fraud was more than £600,000.
In addition, the broker also allegedly carried out trades using investor’s money from their accounts without their authorization. When investors reported to the company that funds have been taken from their account, the court heard, that Eclipse failed to respond to all attempts at contact.
Furthermore, the company said their computer system was hacked, and that was the reason for the missing funds. However, no evidence of this was provided to victims or the investigators.
The Insolvency Service, an executive agency of the Department for Business, Energy, and Industrial Strategy, began investigating complaints from investors. The agency then filed a petition to have the company shut down in the interest of the public.
Commenting on the case, Irshard Mohammed, Investigation Supervisor at the Insolvency Service, said: “Eclipse Finance Limited attracted investors with the promise of high returns but these to be unfounded and investors suffered heavy losses as a result.
The Financial Conduct Authority has warned consumers of the high risks of Binary Options trading, but in this case, no evidence has been found that the company engaged in such trading. Instead, they used the false promise of high returns to attract investment and then disappeared.”
Marketing in a post-MiFID II world
Eclipse is a clear example of how misleading marketing is not tolerated in a post-MiFID II world. The updated Regulation , which focuses on the way brokers and Affiliates are allowed to markets their services, encompasses a broader range of marketing materials.
As a result, brokers should be much more careful when advertising their services to consumers. Most importantly, marketing materials should clearly and accurately present the risks involved with investing and to not make any false, misleading or overstated claims.
In particular, all marketing materials must be “fair, clear and not misleading.” This last part is now applicable for both retail and professional clients. This applies to content on your website, online advertisements (including banners and small print ads), emails and newsletters sent to clients.
However, the regulation isn’t just limited to marketing materials; it also includes financial promotions, the disclosure of charges and fees to clients and any informative content that you might release, online and offline, to engage your target audience.
