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Top-Ten Tips for Online Investors

When You Invest Online, Be Sure To:
  1. Receive full disclosure, prior to opening your account, about the alternatives for buying and selling securities and how to obtain account information if you cannot access the firm’s Website.
  2. Understand that most likely you are not linked directly to the market, and that the click of your computer mouse does not instantly execute the trade.
  3. Receive information from the firm to substantiate any advertised claims concerning the ease and speed of online trading.
  4. Receive information from the firm about significant Website outages, delays and other interruptions to securities trading and account access.
  5. Obtain information before trading about entering and canceling orders (market, limit and stop loss), and the details and risks of margin accounts (borrowing to buy stocks).
  6. Determine whether you are receiving delayed or real-time stock quotes and when your account information was last updated.
  7. Review the firm’s privacy and Website security policies and whether your name may be used for mailing lists or other promotional activities by the firm or any other party
  8. Receive clear information about sales commissions and fees and conditions that apply to any advertised discount on commissions.
  9. Know how to, and if necessary, contact a customer service representative with your concerns and request prompt attention and fair consideration.
  10. Contact the Department of Corporations to (1) verify the registration/licensing status and disciplinary history of the online brokerage firm, or (2) file a complaint, if appropriate.

A recent study on online investing by the New York State Attorney General and the U. S. Securities and Exchange Commission highlighted a number of complaints lodged by online investors, from delayed execution of orders to slow response times, inadequate customer support and possibly misleading advertising claims. The New York report can be reached on the Web at: http://www.oag.state.ny.us/investors/1999_online_brokers/brokers.html.

Additional information can be obtained from the Department of Corporations’ Website at www.corp.ca.gov and North American Securities Administrators Association’s Website at www.nasaa.org, or by calling the Department’s consumer services representative at (213) 576-7643.