Hi Dan. Take a look at this:
Thu, 9 Mar 2000, 10:54am EST
NASD Won't Apply Screening Plan to Current Day-Trading Accounts
NASD Won't Apply Screening Plan to Current Day-Trading Accounts
Washington, March 8 (Bloomberg) -- Proposed rules to make day-
trading firms screen clients and disclose the risks of their fast-
paced trading style would apply only to new customers or accounts,
over the objections of state securities regulators.
``Why should existing day-trading clients not be afforded the
same risk disclosure and protection as new clients?' said Marc
Beauchamp, a spokesman for the North American Securities
Administrators Association, a state regulators' group. ``Some
existing clients could be day-trading unaware of the real risks
involved.'
The National Association of Securities Dealers, in the latest
version of its plan, rejected efforts by the state regulators'
group to extend the day-trading restrictions to clients with
current accounts. The NASD said some day-trading firms argued
``that it would be difficult to review all existing accounts to
determine which accounts should be classified as day-trading
accounts.'
The NASD did change its proposal so restrictions would apply
when existing customers open new accounts, as well as when new
clients open first-time accounts. That move, the NASD said,
``struck the appropriate balance' between concerns of state
regulators and day-trading firms.
The rules are aimed at firms that train investors and charge
them to use computerized trading systems that provide near-
instantaneous access to the stock market, where day traders seek
profits from small, quick movements in stock prices.
The rules, which still must be approved by the Securities and
Exchange Commission, were approved by the NASD board last July 29.
The was coincidentally, the same day that Atlanta day trader Mark
Barton killed 12 people and wounded 12 others before killing
himself, leaving a note that cited trading losses.
The screening rule would require firms that ``promote day-
trading strategies' to decide if day trading makes sense for new
customers based on their capital, their prior investing or trading
experience, their employment status, and other factors. The other
rule would require firms to better disclose the risks of day-
trading to prospective customers.
``The NASD has very prudently disavowed the retroactive
approach,' said James Lee, the president of Momentum Securities
and the head of the Electronic Traders Association, a trade group
of day-trading firms. ``Any rule should be applied prospectively,
not retroactively.
``I could have someone here who's done 20,000 trades and only
has $30,000 in his account. You tell me. Is he suitable?' Lee
asked.
The day-trading industry has been under fire lately. Last
month, the Senate released a study questioning the profitability
of day-trading, the SEC distributed its own review saying the
agency is investigating possible ``serious violations' at some
day-trading firms, and the NASD took regulatory action against six
day-trading firms and several individuals.
The public has until March 23 to submit comments on the
proposed rules to the SEC. The SEC can take three months to either
approve the rules or ``institute proceedings' to determine
whether they should be disapproved, according to a notice in the
Federal Register. |
