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Non-Tech : E*Trade (NYSE:ET) -- Ignore unavailable to you. Want to Upgrade?

To: Curtis E. Bemis who wrote (9606)	11/30/1999 5:14:00 PM
From: Curtis E. Bemis	Read Replies (1) \| Respond to of 13953

The cops are after us-- off Bloomberg SEC's Top Cop Concerned About Online Brokerages' Promotions SEC's Top Cop Concerned About Online Brokerages' Promotions Washington, Nov. 30 (Bloomberg) -- The Securities and Exchange Commission's top enforcement official said he's concerned online brokerages may lure unsophisticated investors with offers of cash, frequent-flier miles and commission-free trades. ``I hate to see an uneducated investor who needs hand- holding drawn to an online account because of some one-time gift,' SEC enforcement director Richard H. Walker told a Securities Industry Association gathering. A handful of leading online brokerages -- including Charles Schwab Corp., ETrade Group Inc., and Fidelity Investments -- have started to offer premiums, such as $150 in cash, to customers who open online accounts. Many people are better suited to invest in mutual funds or through a broker rather than on the Internet, Walker said. Walker, in a Nov. 17 speech that recently was made public, also voiced concern that some online brokerages may be misleading customers about their opportunities to participate in initial public offerings. ``There is no doubt that this is an area where supply does not equal demand, and only a small percentage of interested investors receive shares in each IPO,' he said. The SEC enforcement chief faulted EOffering Inc.'s Web site for promising investment in an initial offering without disclosing ``that actual participation in an IPO is anything but a guarantee.' Closely held EOffering, an online investment bank that is 28 percent owned by ETrade, said it plans to make the Web disclosures suggested by Walker. ``We never had any intention of misleading our investors,' EOffering spokesman Rich Horn said. Risk Disclosure Walker, whose division files cases that can lead to fines or industry ousters, didn't threaten online firms with any enforcement action. Instead, he urged brokerages that offer cash and other giveaways to better disclose the risks of Internet investing, and to compete on quality and cost. He also said online firms that offer participation in IPOs should disclose the probability that a customer would receive initial offering shares. ``He's using the speech as a bully pulpit to give an initial warning,' Columbia University law professor John Coffee said. ``The next step could be a case against some salacious trader.' In the last six months, a handful of leading online brokerages have starting offering one-time gifts or awards in an attempt to lure prospective customers. For example, Ameritrade Holding Corp. is offering new customers two free airline tickets to Mexico, London or Hawaii, as well as a month of free trades. Fidelity is offering free online stock trades for life to 90 random winners of an upcoming contest. Omaha-based Ameritrade said its inducements are no different from banks' offers of free toasters and blankets. ``We are constantly evaluating different promotion offers to see which ones will be attractive to potential customers,' Ameritrade spokesman Michael Anderson said. Schwab, ETrade and Fidelity didn't respond to requests for comment. Gift Certificates San Francisco-based Schwab, the largest online brokerage, is offering a $25 Amazon.com Inc. gift certificate to new investors. Menlo Park, California-based E*Trade, the second biggest, offers between $75 and $150. It also is offering $1 million to the person who best predicts the year-end close on the Dow Jones Industrial Average. Walker's remarks were made as Internet brokers mull last week's report by SEC Commissioner Laura Unger, which said that online firms may sometimes have a legal responsibility to make sure their clients' investments are suitable for their financial goals. Her report said technology that lets Internet sites customize information for individual customers has raised questions about when online brokers are recommending investments that should be screened for suitability. About 16 percent of all stock trades were made online in the first quarter of this year, a CS First Boston report said. The number of accounts rose to 10.9 million in the third quarter from 9.7 million in the previous quarter, and assets rose to $648 billion from $608 billion, according to U.S. Bancorp Piper Jaffray.