FOR IMMEDIATE RELEASE 99-156 Commissioner Laura Unger Releases On-Line Trading Report Washington, DC, November 22, 1999 -- Securities and Exchange Commissioner Laura S. Unger today released a report summarizing the findings from a series of on-line investing roundtables conducted earlier this year. The 95-page report summarizes the significant comments of roundtable participants and makes recommendations for ongoing dialogue between regulators and industry and for regulatory strategies she believes the Commission should consider. The findings and recommendations in the report focus on the issues of suitability, best execution, market data, systems capacity, investor education, on-line discussion forums, privacy, and portals. Commissioner Unger believes these are among the key on-line issues facing investors and the industry today. Commissioner Unger said, "The Internet is rapidly making on- line trading ubiquitous. This report provides the Commission with a comprehensive examination of the critical issues to be addressed in the area of technology. I think it may still be premature for extensive rulemaking in this area, but the report will allow the Commission to focus upon and consider the most vital issues concerning on-line brokerage." Report Recommendations: 1. Suitability: The report recommends that the Commission: * obtain certain information from the industry on data mining products; * alternatively, include as part of future examinations a review of the services firms provide to their customers from data mining information; and * consider specific scenarios and analysis as guidance to the industry about on-line suitability obligations. 2. Best Execution: The report recommends that the Commission: * encourage the industry to demonstrate the relative importance of speed and certainty of execution in today's market environment; * consider requiring market centers to make publicly available uniform information regarding certain best execution factors; * consider requiring broker-dealers to regularly provide customers with plain English information about: (a) the execution quality available on different market centers; (b) the broker-dealer's order handling practices; and (c) inducements for receiving order flow received by the broker-dealer; and * evaluate the potential impact of new order routing technologies on brokers' best execution obligations, investors, and the markets. 3. Market Data: The report concludes that the Commission should encourage the broadest possible dissemination of real- time market data to investors, and that the Commission should evaluate whether the current pricing scheme accomplishes this. The report recommends that the Commission's upcoming market data concept release address the issues raised in this section. 4. Systems Capacity: The report concludes that the Commission should focus on ways to ensure more adequate systems capacity at all broker-dealers and also encourages the Commission to repropose the broker-dealer operational capability rule. The report recommends that the Commission consider requiring broker- dealers to: * maintain and periodically test contingency plans; * maintain records of significant systems outages; * conduct regular systems testing and evaluation; and * include plain English disclosure of the risks of systems delays or outages in new account documentation. 5. Investor Education: The report reviews the current status of investor education and recommends that: * firms partner with the Commission in helping to educate investors; and * the Commission study on-line investor behavior to determine the best place and time to educate investors on the Internet. 6. On-line Discussion Forums: The report recommends that: * the Commission conduct or encourage researchers to conduct a study analyzing the effect of chat room discussions on company's stock prices; and * broker-dealers operating on-line discussion forums consider adopting certain best practices to prevent investor confusion. 7. Privacy: The report recommends that the Commission: * evaluate on-line firms' information collection practices; and * consider certain factors in conducting its statutorily required study on privacy. 8. Portals: Because the federal securities laws generally prohibit entities not registered as broker-dealers from receiving securities transaction-based compensation, the report recommends that the Commission consider whether alternative compensation arrangements are appropriate for entities not registered as broker-dealers. [The is a report by Laura S. Unger. The Commission and other Commissioners have expressed no views regarding the analysis, findings, conclusions, or recommendations herein.] # # #