Monday to discuss whether the National Association of Securities Dealers Inc.'s "suitability" rule should extend to on-line trading.

The need to balance investor protection with rules that let the brokerage industry function effectively and cost efficiently was among the topics discussed at a roundtable hosted by the North American Securities Administrators Association, the umbrella group of state securities regulators.

Improved disclosure and advertising by on-line firms were also prominent themes. Some of these issues will be addressed in a suitability report by SEC Commissioner Laura Unger that is expected to be published within the next few weeks.

The NASD's suitability rule, which is triggered when a broker recommends a particular security, has received heightened attention amid the recent hoopla surrounding on-line trading. That is because it is not always clear what constitutes a recommendation on-line. Suitability, an important issue for all brokerage operations, has always had a heightened importance at banks where customers are more in need of investment advice. And like their nonbank peers, banks are rushing to offer on-line stock trading.

Panelists W. Hardy Callcott, senior vice president and general counsel with San Francisco-based Charles Schwab & Co., and Henry W. Carter, vice president and chief compliance officer at E-Trade Securities Inc., said suitability should not apply when a firm makes general marketing information about products and industries available on-line.

Kenneth S. Spirer, first vice president and assistant general counsel of Merrill Lynch & Co., stressed the distinction between firms that supply information on particular stocks at a customer's request and those that do so on the basis of a customer profile or other information.

Sending information on-line in response to a request should be considered a cost-efficient service to customers and not "push technology," said Mr. Spirer.

Some of the confusion in the area of on-line suitability is because brokerages are not willing to identify potential problem areas and regulators are loathe to place their stamp on issues until they are raised, Ms. Unger said. It is "close to impossible to give the industry guidance until they tell us what they want guidance on," she said.

Elisse B. Walter, chief operating officer of the NASD's regulatory unit said giving guidance will be easier after certain on-line industry practices become more commonplace. Later in an interview, Ms. Walter said she did not know when or if the NASD would provide such guidance.

Meanwhile, Bradley W. Skolnik, Indiana's top securities regulator and president of the state regulators' group, urged the brokerage industry to adopt "best practices" that would provide the underpinnings of investor protection in on-line trading. He also called for increased investor education and cooperation with regulators.

Michael Harkins, first vice president of People's Securities Inc., a unit of People's Bank Connecticut, said he hoped the conference would help clear up confusion.

"There's a lot of uncertainty in the marketplace in terms of how much information and what types of information you should be getting for on-line accounts," he said.

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