Oklahoma City, Oklahoma
Stock Market Investors Cautioned about Online Trading 
For Immediate Release
Thursday, February 25, 1999
Contact: Irving L. Faught, Administrator
  Oklahoma Department of Securities
Oklahoma City/////  As millions of investors open online brokerage accounts and Wall Street's computer systems strain to keep up with demand, Irving Faught, Administrator of the Oklahoma Securities Commission, offered some advice and urged caution.

An estimated 7.5 million investors have online brokerage accounts, a number that's expected to top 10 million by the Year 2000. Not surprisingly, the online brokerage industry is experiencing growing pains. Nationally, cyberspace investors have been complaining from the much-publicized outages and computer glitches at major online brokerage firms. The U.S. Securities and Exchange Commission Chairman Arthur Levitt recently warned investors that they can end up paying more for a stock than they thought because of system delays and Internet shares’ wild price swings. Four members of the U.S. House Commerce Committee sent a letter to the SEC stating their concern about whether there are adequate measures to regulate online investing. They also asked the General Accounting Office to look into doing a report on these activities. There is currently an investigation in New York into online trading firms, to discover, among other things, details about their technology capacity, contingency plans, customer complaints and how orders are processed and executed.

Faught said, "There is no question that the Internet and online investing have leveled the playing field between Wall Street and Main Street and driven transaction costs down. However, investors need to understand that technology is not infallible, particularly in a startup industry. Investors also need to recognize that there is a big difference between online investing and online trading."

Faught urged investors not to be confused by the allure of quick profits from online trading. "Profiting from day trading takes special training and happens to only a lucky few skilled securities professionals. The reality is online trading, as opposed to online investing, is highly risky and only appropriate for people with the temperament of gamblers and who have money they can afford to lose. Despite all the national attention to online trading, the real successes on Wall Street are still accomplished the old fashioned way by searching out quality growth companies and buying and holding for the long term."

Faught offered these tips for investors venturing online.

Before you pick an online brokerage firm, shop around. Magazines like Money and Kiplinger's Personal Finance rate online brokers using such criteria as speed of execution and customer satisfaction.
Contact the Oklahoma Securities Department to see if the firm is properly registered. If the firm is registered in Oklahoma, ask for the firm's CRD record to determine whether it has a regulatory disciplinary history. CRD stands for Central Registration Depository, a computer database containing information on all registered brokers and brokerage firms.
Look beyond the slick advertising. Carefully read the customer account agreement. What happens to you if your trades fail because of computer problems? Understand what you are getting and what you are not getting. Know your rights.
Read postings on Internet news groups to see what other online investors are saying about specific firms as well as the industry.
Make sure you understand how the software works before you make your first trade; find out where to go if you make a mistake or have a problem.
Remember that technology can and does fail and that any system could be overwhelmed by demand in highly volatile market conditions. Your order could be delayed and you may not get the price you want. Consider using limit orders as opposed to market orders.
If you have a problem with your online brokerage firm, try to resolve it first by contacting the firm's branch manager or compliance officer. If that fails, contact the regulatory arm of the National Association of Securities Dealers «www.nasdr.com» and the Oklahoma Department of Securities «www.securities.state.ok.us».
This press release, and related information, is available on the Department of Securities' web site at www.securities.ok.gov, by phone at 405/280-7700, or in writing at:  Oklahoma Department of Securities, 204 North Robinson, Suite 400, Oklahoma City, OK 73102