SEC Chief Vows to Act against Day-Trading Abuses
Hill, Patrice, The Washington Times (Washington, DC)
The Securities and Exchange Commission appears ready to crack down on day-trading firms that entice people to quit their jobs and try gambling in the stock market for a living.
SEC Chairman Arthur Levitt told a Senate panel yesterday that many of the firms are lax about complying with securities laws and deceive their customers by suggesting that profits will come easily if they bet on the day-to-day swings in stock prices.
The SEC chairman singled out an advertisement by All-Tech Investment Group Inc., which has an office in Falls Church, as well as in Atlanta, where a day trader who lost money shot and killed nine persons at two day-trading firms this summer. The All-Tech ad says that day trading "appeals to executives, victims of downsizing or layoffs, retirees, graduating college students and anyone who recognizes the unlimited earnings potential and quality of life which day trading may achieve."
Mr. Levitt called the ad "absolutely appalling. It's an appeal to the worst instincts of people who should be spending their time in casinos," he said.
Deceptive ads can border on securities fraud, he warned, by creating "unrealistic expectations about the potential to profit."
But he added the agency so far has not "found marked and widespread fraud" since it began a broad investigation of the day-trading industry this spring.
"Very few Americans would think it prudent to quit their jobs or to cash in their retirement savings to become professional gamblers who support their families at a Las Vegas casino," said Sen. Susan Collins, chairman of the Senate Governmental Affairs subcommittee on investigations, which called the hearing.
"Yet the day-trading industry estimates that 4,000 to 5,000 citizens are full-time day traders," the Maine Republican said.
Mr. Levitt told the subcommittee that half of the more than 20 firms whose Web sites were reviewed by the agency failed to disclose the substantial risks of day trading. Most people trying their hand at day trading, he said, are just as likely to lose their investments and end up in debt as to make money. …