SEC to Issue Informal Net Trade Guidelines

The Securities and Exchange Commission will soon issue guidelines spelling out how federal securities laws will apply to business conducted over the Internet, an official said Friday. The agency’s planned move comes at a crucial time because securities firms are increasingly providing financial services electronically via the Internet. “In essence, it is a continuation of the commission’s efforts over the last several years to be aware of technology and to try to address that,” said Kristen Geyer, senior counsel in the SEC’s office of market supervision. Geyer said SEC staff members hope to issue the guidelines within a month, but they are still discussing the plan. Even so, she said they are not likely to be proposed as formal rules but rather as informal guidance. Nor will the agency provide formal guidelines describing when a firm’s Internet business is outside the agency’s regulatory purview, she said. Geyer said SEC officials hope the guidelines will provide signposts for firms to help them determine when their Internet business does not fall under the SEC’s regulatory oversight. The offer and sale of securities and investments to anyone in the United States, even if on the Internet, must be in compliance with federal securities laws. Geyer said she “strongly doubts” that the agency guidelines will spell out formally when the agency has regulatory jurisdiction. The SEC is likely to suggest that firms include a prominent disclaimer when they do not intend to conduct business in the United States, she said. The agency will also probably suggest that firms with “passive” Web sites, which do not interact with potential securities customers, will not be subject to federal securities laws.