of computer systems, and clients will tend to gravitate to those firms with the most dependable systems, and the systems that can handle the most customers. The SEC Report concludes the following. “The Commission should focus on methods to ensure more adequate systems capacity at all broker-dealers.The Report recommends that the Commission consider requiring broker-dealers to:1.Maintain and periodically test contingency plans;2.Maintain records of significant systems outages; 3.Conduct regular systems testing and evaluation; and4.Include plain English disclosure of the risks of systems delays or outages in new account documentation” Although occasional systems failures are inevitable, sincere effort has and will be devoted to ensure that such outages are infrequent.Second is the question of “Best Execution”. This concerns a broker’s responsibility to seek for their clients the most favorable terms that are readily available . Dealers must implement a regular analysis of transaction systems and investors must realize that however fast the Internet is, trades are not instantaneous. Consequently a uniform system must be developed to ensure that all orders are executed in a nearly equal and thus fair window of time. Failure to do so may be a violation of the antifraud provisions of the federal securities laws, in addition to quickly alienating customers who are now capable of quickly switching the companies with which they do business. Typically, however, orders are fed first come, first serve into a computer database of numerous markets, and are filled automatically by the system at the best terms readily available.Third is the concept of suitability, and its application to online investing. The primary difficulty with this concept, however, is drawing the line between providing information and making a recommendation to a customer. It is generally agreed that when a firm provides pure order entry and...
