Secretary Cox, Sen. Mike Polak Propose Legislation to Strengthen Regulation of Day Trading Securities Firms

ATLANTA, GA February 10, 2000 … New legislation introduced on behalf of Secretary of State Cathy Cox in the Georgia Senate today would strengthen regulation of securities firms that promote day trading in Georgia.

    State Senator Mike Polak (D- 42^nd Dist.) introduced SB 444 to amend Georgia’s securities act to require firms that specialize in opening day trading accounts make a detailed disclosure to potential customers of the "extremely risky" nature of day trading activity. The bill would further require that those firms make a determination that a day trading strategy is suitable for the customer, based on that customer’s financial situation, investment objectives and prior trading experience. These provisions mirror current suitability determination requirements that apply to recommendations of specific securities or options trading accounts.

    Advertising and sales messages promoting day trading would also be subject to review under Senator Polak’s bill. The legislation would make it a violation of Georgia law to disseminate misleading claims, statistics or promises in conjunction with any advertisement, sales material, training course or seminar promoting day trading.

    "I am grateful to Senator Polak for taking the lead in seeking these important changes to Georgia’s securities laws," said Secretary Cox. "Regulators at the state and federal level have for some time been studying the most effective regulatory options to insure that investors are not misled into believing day trading is a sound investment strategy. In fact, a recent study by state regulators showed that many day traders lose every dollar they invest in these risky investment programs. Our new legislation would insure that consumers are fully informed of the risks inherent in day trading. It is also important that we have the ability to sanction firms who make misleading and false claims in their advertising and marketing messages. We are hopeful the General Assembly will move quickly to consider this important new legislation," Secretary Cox added.

    SB 444 also amends current statutory provisions regarding the licensing of investment advisers. Current law provides that investment advisers with fewer than six clients are not required to register. Senator Polak’s bill would remove that exemption for any adviser who promotes or recommends day trading.

    Violations of the provisions of the bill would be subject to civil or criminal penalties.

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