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Do you go cross-eyed calculating your position in a margin account? Are the distinctions between a market order and a limit order Greek to you? Ever wonder why stocks act the way they do in after-hours trading? Want to file a complaint against your online broker?
Then click over to the Investing Online Resource Center at www.investingonline.org. First launched in December, 1999, the investor-help site has undergone a major remodeling and is now sponsored by the North American Securities Administrators Assn., a group of state regulators.
To learn more, I phoned NASAA's president, Deborah Bortner, who is director of the securities division in Washington State's Financial Institutions Dept. In edited excerpts, here's what she had to say:
Q: Why are you relaunching your Web site?
A: The information that investors need now is about the things that they're complaining about right now.
Q: Please explain.
A: Back in 1999, when we first started getting complaints, they were mainly about issues that related to [the mechanics] of online investing. The complaints we're getting now are more focused on substantive issues, mainly margin trading and the fact that many investors who signed up for online accounts were just automatically put into margin accounts.
Q: Is that because investors are better educated now, or just because there are fewer of them and the ones who are asking questions have been educated through tough experience?
A: One thing that happened as a result of complaints that first came in is a lot of online firms changed their Web sites so as not to allow investors to push a button several times and automatically order 100, then 200, then 300 shares.
Q: What did the online brokers do?
A: They put in a little speed bump to slow investors when they were putting in identical information. Let's say they want to buy 100 shares of Lucent (LU
) and they push the button again for another 100 shares...the online account will ask them, "Do you want to buy another 100 shares?"
Q: So the brokers now double check to make sure investors aren't just pounding their keyboards impatiently. What are the new issues, and how is the site addressing them?
A: We tried to make all of the educational pieces on the site interactive, so that people weren't just reading information, but they were actually participating in their learning process. The main simulation that we put together as a result of complaints was a margin account simulation [because that's a major concern].
Q: So the simulation walks people through how a margin account works. What else?
A: The other one is a limit order/market order simulation -- what happens when you place a market order as opposed to a limit order. For new investors, there's a feature on new-account sign up. So it tells them what they're signing up for when they check the little boxes. And there's a new feature about online investment hype.
Q: What's that?
A: We know that a lot of people get spammed [with bogus investment come-ons], and they get defrauded. So [with this simulation] we're trying to educate people to not believe everything you see on your screen and check it out, and to show what could happen to you if you don't.
Q: Among more sophisticated investors, what kind of problems do you find they're running into online?
A: After-hours trading. And we have added a [FAQ], "The Facts About After-Hours Trading." Even the more sophisticated investors, I'm not sure they know exactly what happens in after-hours trading. We try to warn people about investing during the [hours] when the market isn't really active.
Q: Washington State, where you live, is in the Pacific time zone. Does that mean your constituents are more interested in after-hours trading?
A: Absolutely. I'm interested in it, although I have tended not to trade in the after hours because I know that there are some downsides to it. But, yeah, when we go home [from work], the market's closed.
Q: What do you think was the worst way individual investors have been abused online?
A: Lack of [brokerage-firm] capacity. In April, 1999, when people were trying to either get in [the market] or get out, mostly get out, they couldn't. And they couldn't get ahold of anybody. So I think that was probably the single worst problem.
The firms had no idea that people were going to be as attracted to online trading as they were. And they spent a lot more money on advertising and a lot less money on capacity. And I think their customers suffered at the time for it. I think that's over with now.
Q: What else is new at the site?
A: There's a section on how to make a complaint. It just puts [investors] right over to their state securities regulator. It gives them the address and the e-mail and all of that information.
Q: So making a complaint is a few clicks away?
A: Right.
Barker covers personal finance in his Barker Portfolio column for BusinessWeek. His barker.online column appears every Friday, only on BW Online Edited by Patricia O'Connell
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