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From...
Online brokers under scrutiny
by Nancy Weil
(IDG) -- In what could be a sign of stepped-up scrutiny, the New York attorney general's office is conducting an inquiry into online brokerages, and four members of the U.S. House of Representatives have asked the U.S. Securities and Exchange Commission (SEC) to do more to protect the rights of online investors.
The New York probe was announced last week, which was when the popular online brokerage E-Trade suffered glitches that shut down its stock trading system. The attorney general's office isn't releasing names of online brokerage firms under investigation or the number of brokerages targeted in the inquiry, a spokesman said.
The investigation comes "in response to a recent surge of customer complaints," according to a statement from Attorney General Eliot Spitzer. His office has heard "dozens" of complaints regarding online brokerage service in the past month, the statement said.
Spitzer is asking that consumers fill out a survey on his office's Internet site that describes their experiences using online brokerage services. Consumers from all U.S. states may answer the survey questions.
The inquiry will attempt to find solutions to the problems consumers say they have had and to develop ways to protect online investors, the statement said.
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Spitzer is asking that consumers fill out a survey on his office's Internet site that describes their experiences using online brokerage services. Consumers from all U.S. states may answer the survey questions.
The inquiry will attempt to find solutions to the problems consumers say they have had and to develop ways to protect online investors, the statement said.
Similar goals apparently spurred four House Democrats, who wrote to the SEC regarding the amount of disclosure online brokers provide to investors. They also asked the regulatory agency to keep tabs on the industry and deal with consumer complaints.
It's likely that such concerns will be aired with increasing frequency, said Alan Alper, an analyst at Gomez Advisors Inc., a Concord, Mass., firm that tracks and analyzes Internet brokers and bankers. Alper said he anticipates increased federal and state scrutiny.
The Gomez online message board contains a section devoted to performance problems users experience in dealing with Internet brokerages, including technological limitations, slow execution of trades and shoddy customer service.
"There's definitely some growing pains out there," Alper said. "The volumes the online brokers are processing are 100% higher than they were just in the early fall. It's a young industry, and technology is not perfect. There's a lot of expectations there that have not been met."
Online investors seem particularly upset when they are quoted a stock price and put in a market order only to discover that by the time the trades are executed and they receive confirmation, the price has changed, Alper said.
"Consumers say, 'What gives?' " he said.