Operational Gripes Top SEC's List

Operational complaints now lead the list of complaints the SEC gets from investors about broker/dealers--surpassing sales practice-related problems for the first time ever."This is not surprising in a bull market," says Nancy Smith, director of the SEC Office of Investor Education and Assistance. "If the market is doing well, people complain less" about sales practice issues.But growth in Internet

Operational complaints now lead the list of complaints the SEC gets from investors about broker/dealers--surpassing sales practice-related problems for the first time ever.

"This is not surprising in a bull market," says Nancy Smith, director of the SEC Office of Investor Education and Assistance. "If the market is doing well, people complain less" about sales practice issues.

But growth in Internet trading has sparked a surge in operational complaints. In 1998, the SEC received 722 complaint letters about failure to process orders or delays in order execution--a 54% climb, the largest gainer among the top five complaint categories.

"That's a reflection of online trading," Smith says.

Account transfer beefs, a perennial problem, rose 42% in 1998 totaling 1,181 (see June 1999 RR, Page 28, for a special report on transfer delays).

Meanwhile, other complaints against online trading firms are exploding. The SEC has been separately cataloging complaints against online trading firms. In the six-month period from October 1998 to March 1999, 1,564 online-related letters were received--already 40% more than during the full 1998 fiscal year. Most of these complaints were operational. The three leaders: difficulties in accessing accounts, failures or delays in executing orders and errors in processing orders. The latter problem generated 594 complaints in 1998, a 127% increase from 1997, making processing errors the fastest growing problem area among all categories.

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