On-line trading continues to be an important part of the securities trading market. The industry reports investing greater resources to improve the performance of their systems, and regulators have made substantial progress in ensuring that investors receive better information in key investor protection areas. However, investors trading on-line continue to file many complaints about failures and delays in processing orders. GAO believes that providing complete information on the websites of on-line broker-dealers would allow investors to make more informed investment decisions.
Recommendations for Executive Action
|United States Securities and Exchange Commission||To address the continuing concerns that investors have about failures and delays in processing orders, and to improve regulators' ability to assess broker-dealers' compliance with Securities and Exchange Commission (SEC) capacity guidance, the Acting Chairman, SEC should work with the industry to establish consistent and meaningful measures for outages and delays and to ensure that broker-dealers maintain consistent records of system slowdowns and outages that impact their customers. Such information could be used by broker-dealers to better inform investors about the potential for and adverse effects of delays and outages.|
|United States Securities and Exchange Commission||The Acting Chairman, SEC, should take steps to ensure that the conspicuous plain English disclosure of margin risk and the risk of systems outages or delays, and disclosure of trading risk be made on Web sites of broker-dealers that offer on-line trading. Where appropriate, such Web site disclosure would be most useful where its delivery is tailored to individual investors.|
|United States Securities and Exchange Commission||Given the uncertainty over the ultimate impact of OCIE's recommendations to broker dealers, the Acting Chairman, SEC, should monitor the extent to which broker-dealers embrace OCIE's recommendations and other guidance on disclosing trading risk and the risk of systems outages or failures, and on protecting investor records and information. On the basis of this assessment, the Acting Chairman, SEC, should determine the need for further rule making in these areas.|