WASHINGTON — They seem to be everywhere: on prime time, wrapped around big sports events — including the Super Bowl — and in newspapers. With some 10 million Americans trading stocks at least occasionally over the Internet, it's not surprising that online trading ads are hot.
Now the Federal Trade Commission is reviewing a complaint by a traditional brokers' group that advertising by Internet brokerages lures investors with unrealistic promises of quick riches and unfairly attacks full-service rivals.
"We've received the petition, and we're looking at it," Lee Peeler, the FTC's associate director for advertising practices, said Monday. He declined further comment.
Online customers account for about a quarter of all retail stock trades, and an eye-popping $415 billion in assets was estimated to be sitting in online brokerage accounts in 1998.
Some regulators believe the online trading industry has toned down its ads in response to public criticism last spring by Arthur Levitt, chairman of the Securities and Exchange Commission. He likened some online brokerage ads to commercials for the lottery.
Since Levitt made the comments, "We've seen an improvement in the nature of the online ads," said SEC spokesman Chris Ullman. "They're less hyperbolic than before and less inclined to imply that exorbitant riches come with the click of a mouse."
"They've sort of backed off" in recent months, agreed Jack Trout, who heads his own marketing consulting firm in Greenwich, Conn. "Now they're pitching, for example, 'Trust yourself' or 'You can do it yourself.' "
One TV ad for an online brokerage, rather than holding out the prospect of investors owning their own island or Lear jet, goes negative and portrays a conventional broker as a poor schlub with a rumpled coat who drags himself out of bed every morning before daylight and gets on a crowded subway train.
That's quite different from last year's ad with the tow-truck driver who traded stocks online and made enough money to buy his own island.
The brokers' group that filed the complaint in December, the National Association of Investment Professionals, believes the ads have improved but remain a problem and that they put pressure on traditional brokers to respond by also making exaggerated claims.
"There's a pressure to keep the playing field even," said William MacLeod, a Washington attorney representing the group.
He cited one TV ad that takes a get-even shot at online brokerages by showing a telephone ringing, unanswered, amid a bank of computers with no humans in sight.
"The stock market is a very risky place and people need to be well aware of those risks," said MacLeod, who headed the FTC's bureau of consumer protection from 1986 to 1990.
He said the brokers' group, which also includes investment advisers, wants to see online brokerage firms adhere to the same advertising rules that traditional brokers have had to follow. The rules prohibit "exaggerated, unwarranted or misleading" statements or claims.
The group asked the federal agency to step in because self-policing efforts by the National Association of Securities Dealers, the group that operates the Nasdaq Stock Market, apparently were insufficient, MacLeod said.
Nancy Condon, a spokeswoman for NASD Regulation, declined comment on the petition to the Federal Trade Commission.
Elisse Walter, chief operating officer of NASD Regulation, said in November that advertising "is more of a (company) responsibility than it is a regulatory responsibility."
She said the self-regulatory group has reviewed ads and even had some of them killed, both by online and traditional brokerages. But, she added, "It has to be the firms, who really are on the front line, making sure their advertising is responsible."
Denica Gordon, a spokeswoman for Morgan Stanley Dean Witter Online, said the company did not wish to comment. Charles Schwab Corp. spokeswoman Sarah Bulgatz said the brokerage firm had no immediate comment.
Calls to spokesmen for another big online brokerage, ETrade Group Inc., weren't immediately returned.