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Microcap & Penny Stocks : TGL WHAAAAAAAT! Alerts, thoughts, discussion. -- Ignore unavailable to you. Want to Upgrade?

To: Popiye who wrote (29441)	2/21/2000 3:39:00 PM
From: myturn	Read Replies (1) \| Respond to of 150070

I am bringing these to our attention. Like I stated before; there must be a lot of people losing a lot of money from online trading. PROCEED WITH CAUTION AND DO NOT, DO NOT USE YOUR LIFE SAVINGS. SEC eyes stricter rules for Net brokerages By Bloomberg News Special to CNET News.com November 22, 1999, 2:30 p.m. PT WASHINGTON--Firms that offer stock trading on the Internet may sometimes have a legal responsibility to make sure their clients' investments are suitable for their financial goals and experience, according to a report by a member of the Securities and Exchange Commission. The report by SEC commissioner Laura Unger was released as New York's attorney general said the securities industry would spend $500,000 for an advertising campaign to educate consumers about the benefits and pitfalls of Internet trading. Online brokers have resisted the notion they may have "suitability" obligations like those imposed on traditional stockbrokers, saying they generally only fill trading orders generated by their clients. Unger's report, however, says technology that lets Internet sites customize information for individual customers has raised questions about whether online brokerages are recommending investments that should be screened for suitability. "In the online environment, pinpointing what constitutes a recommendation can be difficult," said Unger's report to other commissioners. "As data-mining technology enables online firms to customize information and provide it to customers, this question becomes even more pressing." Unger's report lays out recommendations and issues for study that could provide the basis for action to protect clients of online brokerages. But it doesn't specifically call for new regulations, which she said "may still be premature." The SEC's Unger and New York state attorney general Eliot Spitzer oversaw separate studies of online stock trading, which has given individuals unprecedented new avenues for investing while raising concern among regulators that some investors may not fully understand some aspects of Internet trading and that regulations may not provide adequate consumer protections. Spitzer's office examined practices of seven online brokerages after consumer complaints of poor service by some brokers. The New York attorney general today said customers may not understand the mechanics of trading online. "There has been a prevalent belief that placing an order is the same as executing a trade. That is not true," Spitzer said. At some Web sites, there has been "a significant delay between the click of your mouse" and execution of a trade, he said. Unger's report for the SEC outlines situations that may trigger obligations by brokers to assess the suitability of a client's investments. The report also recommends that the SEC expand examinations of online brokerages to include a review of what services firms provide to their customers based on data gleaned from their online sessions. Online firms have said they merely execute trades with little broker interaction. Unger's report disagrees, saying new technology is blurring the distinction between mere order-taking and recommendations about investments. A suitability obligation may kick in, for example, when an Internet brokerage firm uses electronically gathered information about a customer's past transactions to alert them to similar investment opportunities when they click on the firm's Web site, the report said. "When does the way you provide information become a recommendation?" Unger asked at a public forum earlier this month in Washington. "This is where you'll see the more difficult suitability analysis coming down the road.' Hardy Callcott, general counsel for online brokerage Charles Schwab, said at the same forum that regulation that's too heavy-handed will outweigh the benefits of online trading--its speed and relatively low cost. Finding technology that can make a suitability determination online isn't a challenge in itself, the report said, citing a news report that E*Trade Securities is currently looking for a vendor to do just this. Suitability obligations could nevertheless raise costs and impede marketing opportunities for online brokers, said Saul Cohen, a lawyer with the Proskauer Rose firm who has represented some online trading firms. "What they stand to lose are the additional costs involved in not being able to market products the way they should be marketed, additional compliance costs, and really great difficulties, it seems to me, in executing orders if they have to have some kind of filtering system to see if some order, as it's being entered by someone in the great big cyber world, is suitable for them," Cohen said. Even so, Unger's report said some industry representatives--it didn't specify which--would welcome guidance from regulators about which online activities trigger suitability obligations, especially given new product development underway. The report said that some industry representatives with whom Unger spoke conceded they do plan to move away from just offering "pure execution at a cheap price to the rebundling of advice with execution," the report said. "As part of this move, many firms are developing or planning to develop products that provide personalized information online." For example, some firms now have online asset-allocation systems that ask a customer about his financial objectives and then provide a number of potential investments that the customer may want to consider adding to the portfolio. Unger, one of five SEC commissioners, spent 10 months preparing her report. Part of her preparation involved regional "roundtable" meetings over the past year with brokerage executives and academic experts to discuss the regulatory issues raised by Internet trading. Unger's report covers other issues, including privacy rights for Web investors, system capacity and best execution of online trades. Participants at Unger's roundtables generally agreed that the development of Internet trading "warrants a re-evaluation of the pricing model for delivering real-time market data to individual investors." The report noted that the Internet's ability to broadly disseminate real-time information and the simultaneous rise of online trading have substantially increased demand for market data. The report recommends that the SEC consider: ? Requiring market centers to make certain uniform information is available on factors that could determine the best way to execute a customer's order; ? Requiring broker dealers to provide customers with plain-English information about execution quality, handling practices and the inducements for receiving order flow received by the broker dealer; ? Requiring broker-dealers to periodically test contingency plans for dealing with outages and other problems with their systems capacity; ? Requiring plain-English disclosure of the risks of systems delays or outages; ? Requiring brokerage computers to have "sufficient operational capability" ? Evaluate online firms' information-collection practices; ? Study online investor behavior to gauge the best place and time to educate investors on the Internet. Copyright 1999, Bloomberg L.P. All Rights Reserved.