Day Trader Calls Senate Probe ‘an Ambush’
All-Tech Direct Inc. Chief Executive Harvey Houtkin defended his work at one of the largest U.S. day-trading firms, saying Friday that a U.S. Senate inquiry into the day-trading phenomenon has become “a search-and-destroy mission.”
“This is not a hearing. This is not an impartial tribunal. What it is, is a search-and-destroy mission, a crucifixion, an ambush,” Houtkin told a hearing by the Senate permanent subcommittee on investigations, headed by Sen. Susan Collins (R-Maine). “If people want to trade voluntarily with their eyes open--that’s a real problem to the U.S. Senate?”
Houtkin, one of the day-trading industry’s most prominent figures, was among the last witnesses at a two-day subcommittee hearing in which former day traders and others had questioned and criticized the firms that offer rapid-fire trading for investors who hope to profit from small, quick stock price movements.
Montvale, N.J.-based All-Tech and other firms provide training and computer equipment to individual customers, many of whom rely on loans to buy stock and trade in high volume.
The subcommittee heard Thursday from two former clients of All-Tech’s San Diego branch office, who said they inadequately trained to profit from day trading and were pressured to make commission-generating trades.
On Friday, Houtkin said the branch was run by a “rogue” manager now involved in a legal dispute with All-Tech. Houtkin described himself as a “market reformer” who has democratized the securities industry by providing clients with technology that gives them the same near-instantaneous access to the stock market once enjoyed only by market makers and professionals.
This has upset Wall Street’s old guard, Houtkin said. “It seems politically expedient to slow down the growth of direct access. I am bringing direct access to the public, for better or worse.”
The Senate hearing comes days after All-Tech was charged by the Securities and Exchange Commission with loaning customers more money than allowed under federal rules.
The SEC alleged that All-Tech made the loans so that customers could satisfy the margin calls placed by the firm’s clearing firm. Houtkin has said he plans to contest the charges and that they are “totally baseless.”
James Lee, the president of Momentum Securities and the president of the Electronic Traders Assn., a day-trading trade group, said the firms “suffer immeasurably as an industry when other companies’ practices are below standard.”
“As with any industry, I believe there are good, well-intentioned companies who represent best industry practices and others that fall short,” Lee said.
Collins’ subcommittee has released a study that questions the profitability of day trading, the SEC has distributed its own review saying the agency is investigating possible “serious violations” at some day-trading firms, and the National Assn. of Securities Dealers has announced regulatory charges against six-day trading firms and several individuals.
