Internet brokers warned about consumer protection

Internet brokers warned about consumer protection

Internet brokerages are not doing enough to warn their customers about the risks of online trading, says the US General Accounting Office in a report to Congress.

The number of online stock trades by individual investors almost doubled last year, rising to about one million deals a day, the GAO reports. There were 19.3 million online brokerage accounts in the United States in the fourth quarter of last year, compared with 8.6 million in the first quarter of 1999.

But while individual investors most frequent complaints concern failures or delays in processing orders, online brokers are not always required to maintain consistent records of systems failures which affect trade execution, the GAO notes.

It calls on the Securities and Exchange Commission to establish clear definitions for system outages and delays and mandate that broker-dealers maintain consistent records. The SEC should also ensure that online brokers provide clear information about the risks of trading online and disclose more information about consumer protection and privacy.

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