Online investing ads inspire complaints from group

WASHINGTON - They seem to be everywhere: on prime time, wrappedaround big sports events - including the Super Bowl - and innewspapers. With some 10 million Americans trading stocks at leastoccasionally over the Internet, it's not surprising that onlinetrading ads are hot.

Now the Federal Trade Commission is reviewing a complaint by atraditional brokers' group that advertising by Internet brokerageslures investors with unrealistic promises of quick riches andunfairly attacks full-service rivals.

"We've received the petition, and we're looking at it," LeePeeler, the FTC's associate director for advertising practices, saidMonday.

Online customers account for about a quarter of all retail stocktrades, and an eye-popping $415 billion in assets was estimated tobe sitting in online brokerage accounts in 1998.

Some regulators believe the online trading industry has toneddown its ads in response to public criticism last spring by ArthurLevitt, chairman of the Securities and Exchange Commission. Helikened some online brokerage ads to commercials for the lottery.

Since Levitt made the comments, "We've seen an improvement in thenature of the online ads," said SEC spokesman Chris Ullman. "They'reless hyperbolic than before and less inclined to imply thatexorbitant riches come with the click of a mouse."

"They've sort of backed off" in recent months, agreed Jack Trout,who heads his own marketing consulting firm in Greenwich, Conn.

"Now they're pitching, for example, 'Trust yourself' or 'You cando it yourself.'"

One TV ad for an online brokerage, rather than holding out theprospect of investors owning their own island or Lear jet, goesnegative and portrays a conventional broker as a poor schlub with arumpled coat who drags himself out of bed every morning beforedaylight and gets on a crowded subway train.

That's quite different from last year's ad with the tow-truckdriver who traded stocks online and made enough money to buy his ownisland.

The brokers' group that filed the complaint in December, theNational Association of Investment Professionals, believes the adshave improved but remain a problem and that they put pressure ontraditional brokers to respond by also making exaggerated claims.

"There's a pressure to keep the playing field even," said WilliamMacLeod, a Washington attorney representing the group.

He cited one TV ad that takes a get-even shot at onlinebrokerages by showing a telephone ringing, unanswered, amid a bankof computers with no humans in sight.

"The stock market is a very risky place and people need to bewell aware of those risks," said MacLeod, who headed the FTC'sbureau of consumer protection from 1986 to 1990.

He said the brokers' group, which also includes investmentadvisers, wants to see online brokerage firms adhere to the sameadvertising rules that traditional brokers have had to follow. Therules prohibit "exaggerated, unwarranted or misleading" statementsor claims.

The group asked the federal agency to step in because self-policing efforts by the National Association of Securities Dealers,the group that operates the Nasdaq Stock Market, apparently wereinsufficient, MacLeod said.

Nancy Condon, a spokeswoman for NASD Regulation, declined commenton the petition to the Federal Trade Commission.

Elisse Walter, chief operating officer of NASD Regulation, saidin November that advertising "is more of a (company) responsibilitythan it is a regulatory responsibility."

She said the self-regulatory group has reviewed ads and even hadsome of them killed, both by online and traditional brokerages. But,she added, "It has to be the firms, who really are on the frontline, making sure their advertising is responsible."

Denica Gordon, a spokeswoman for Morgan Stanley Dean WitterOnline, said the company did not wish to comment. Charles SchwabCorp. spokeswoman Sarah Bulgatz said the brokerage firm had noimmediate comment.

Calls to spokesmen for another big online brokerage, ETrade GroupInc., weren't immediately returned.

-30