Internet trading by uneducated bodes disaster, SEC
By Jane Sutton
MIAMI, March 6 (Reuters) - On-line stock trading by uneducated investors with lofty
expectations is ''a prescription for disaster,'' the chairman of the U.S. Securities and
Exchange Commission said on Saturday.
''With a few keystrokes you can spend hundreds of thousands of dollars,'' SEC Chairman
Arthur Levitt cautioned at a town hall meeting of investors sponsored by the Miami Herald.
''You've got to do your part to make sure you have financial knowledge...You need to be armed with reliable information,''
Levitt told some 3,000 participants.
The SEC chief said the United States' eight-year economic expansion had brought above-average returns on stock investments,
fueling interest among novice investors.
In 1980, one in 18 Americans owned securities, either through direct stock ownership or indirectly in such things as pension
funds, he said. Today the number is one out of three.
''We're no longer a nation of savers, we're a nation of investors,'' Levitt said.
At the same time, electronic trading has made it easier to buy and sell large blocks of securities easily, giving some investors a
false sense of economic ''machismo,'' Levitt said.
''With growth in on-line investing, more and more people, I fear, are entering the market with unrealistic expectations,'' he said.
''That is absolutely a prescription for disaster.''
Instant trading and high expectations have also made it easier for con artists to prey on the uneducated, he said.
''It's a sad reality that the best markets bring out the worst elements,'' Levitt said. ''There's a reason crooks hawk their wares
by phone or over the Internet -- they don't give you anything in writing so you can study the details carefully.''
Levitt said Internet fraud and on-line trading abuses had become ''a major area'' of concern for the SEC. The agency has
brought 66 cases of Internet fraud in the last 18 months and expects to file 33 more over the next three months, he said.
Many of the 66 cases involved wildly unrealistic promises of guaranteed returns of 100 percent to 300 percent. In one case,
scam artists persuaded Internet investors to pour $12 million into a nonexistent eel farm, he said.
''By the time we got to this, all the money was lost,'' he said. ''On-line trading is here. It's important. It's useful. But you have to
be careful.'' |
