Securities regulators said Tuesday that they are taking aim at on-line brokerages-with special attention to their advertising.
Securities and Exchange Commission Chairman Arthur Levitt warned on-line brokers that they risk regulation if their ads do not inform investors better about risks. "Some on-line firms' advertisements more closely resemble commercials for the lottery than anything else," he said.
Mr. Levitt and other regulators, who spoke at the National Press Club, said they are concerned about such ads as a television commercial by Morgan Stanley Dean Witter & Co.'s Discover Brokerage Direct unit that features a tow-truck driver who bought his own island nation with stock-trading profits.
Mary Schapiro, president of the National Association of Securities Dealers' regulatory unit, said her group may start doing advance reviews of television and radio advertising by on-line and day-trading firms.
Stuart Kaswell, general counsel of the Securities Industry Association, the brokerage trade group, said pre-publication review of ads would "create a logjam," putting Internet advertisers at an unfair disadvantage.
Mr. Levitt also said the SEC will seek money to nearly double the staff assigned to fraudulent on-line stock activity.