September 28, 2000
The Honorable David M. Walker Dear Mr. Walker: We are writing with reference to the U.S. General Accounting Office (GAO) report, Online Trading: Better Investor Protection Information Needed on Brokers’ Web Sites (GAO/GGD-00-43, May 9, 2000), which was prepared at our request. In that report, GAO recommends that the SEC require broker-dealers with online trading systems to maintain consistent records on systems delays and outages and their related causes and to disclose the potential for service disruptions on their Web sites. GAO also recommends that SEC monitor these records to ensure that firms have adequate capacity to serve their customers. GAO further recommends that SEC ensure that broker-dealers with online trading systems include accurate and complete information on their Web sites in the key investor protection areas of risk disclosure, margin requirements, privacy protections, and trade executions. In our June 8, 2000, letter to SEC Chairman Arthur Levitt, we endorsed these modest proposals and asked for a progress report by November 3, 2000. It is with some concern therefore that we recently became aware of the enclosed comment letter to the SEC from the Securities Industry Association (SIA). That letter claims that the focus of GAO’s report is "misplaced" and labels the recommendations "premature." It asks the SEC to defer to industry development of voluntary best practices guidelines. We request that you provide a written response to the concerns set forth in the SIA letter by Friday, October 13, 2000. Moreover, as part of your continuing work on online trading issues, we ask that you examine and report on the status and adequacy of the initiatives of the SIA’s Online Brokerage Committee and the NASDR’s E-Brokerage Committee. We commend the industry for its efforts to address what it concedes are important issues, and we request your assistance in understanding whether the SIA proposals adequately address the problems identified in your report. Your response should include an assessment of the ability of the SEC and the self-regulatory organizations to examine for compliance and to take disciplinary action against violations of the contemplated best practices guidelines. Thank you for your cooperation and attention to our request. Sincerely,
Enclosure
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