RCA - June 1997 - Ask The Analyst - Electronic Communications

Q: What is the NASD's position with respect to language such as "you can trade on-tine" or "you get direct access to the markets from your home"?

A: We are concerned about communications that imply an investor can trade securities without using a broker. Investors cannot directly access the markets or execute trades. The Internet or other electronic means enable a customer to place an order electronically for execution by a member firm. Language describing electronic trading must accurately reflect how the transactions are handled. Some communications improperly create the impression that every investor can trade for less electronically. Members must disclose any restrictions on a quoted discount or trade cost such as trade size, security type, etc. Unqualified statements about savings by trading electronically will mislead unless all trades made through the electronic medium receive the stated savings.

Q: Our firm would like to advertise on the Internet using a so-called banner" advertisement to hyperlink to our homepage. Can we simply include our name in the banner advertisement without further disclosure?

A: Yes. Typically, a banner advertisement consists of a single word or phrase, often graphically depicted as a button, which directly links the Internet user to a specific homepage. An Internet banner advertisement functions much like an envelope in a paper communication. In the case of a banner advertisement that does no more than disclose a member firm name and enable the user to link to the member firm's homepage, there: is no need to include additional disclosure in the communication. However, if the advertisement offers specific products or services, additional disclosure may be required to comply with applicable standards.