SEC Averse to Regulating Financial Sites
Wall Street’s top regulator indicated Wednesday a reluctance to start regulating online financial data sites as brokerages, saying the Securities and Exchange Commission is straining enough as it is.
“My concern isn’t to increase the number of broker-dealers who are registered, actually far from that,” acting SEC Chairwoman Laura Unger said at a discussion on financial portals like Yahoo Finance and Motley Fool, which are increasingly competing with brokerages for customers.
“We have limited resources, we don’t need to regulate more people,” Unger said. She added the commission and other regulators also must balance the protection of investors, who may be confused between the content on the sites and the hyperlinks that take them to advertising brokerages.
With about 3,000 staffers, the SEC oversees nearly 700,000 brokers employed by 8,000 firms. It also is in charge of 15,000 publicly traded companies and about 8,000 investment advisors.
The discussion brought together representatives from the brokerage industry as well as major Internet firms such as AOL Time Warner Inc. and Yahoo Inc.
The portals provide stock prices, market news and financial analysis tools to help investors track their portfolios.
One area that drew the SEC’s interest was the compensation arrangements between the portals and the brokerages that advertise on the sites.
Securities lawyers say the SEC feels that if an entity is paid on a transaction basis by a broker-dealer or refers someone to that broker-dealer to open an account and trade stocks, then the entity may have crossed the line into broker-dealer territory.
The participants debated whether advertising revenues were driving content on the site, among a range of other topics in the nearly four-hour discussion.
John Scheibel, Yahoo’s director of government relations, said “we neither perform the functions of a broker-dealer nor do we hold ourselves out as a broker-dealer to our users.”
As a result, he said, “Internet portals such as Yahoo should not be regulated as broker-dealers.”
Gregg Sharenow, a managing director at National Discount Brokers, said his company would like to be able to pay portals and others according to “a model that works for us,” that is, on a return on investment basis.
