REGULATORS GROWL AT GET-RICH-QUICK THEMES — CRITICS: ONLINE ADS GETTING OUT OF LINE

As online discount brokers push the concept that anyone can invest, they risk creating the impression that playing the market is easy — and antagonizing securities regulators leery of get-rich-quick advertising.

Television ads showing a tow truck driver who bought an island or a woman taking time from her jog to trade stocks push the envelope of responsibility, critics contend.

“The not-so-subtle message is that everyone can be a day trader and own an island,” says a spokesman for the North American Securities Administrators Association, a Washington lobby for state and provincial regulators.

“There’s very little discussion about the potential downside,” says Denise Voigt Crawford, commissioner of the Texas State Securities Board.

Marketers scrambling to build market share in a fast-growing industry are raising concerns among officials, who worry that investing is being packaged and marketed as something fun.

Indeed, an industry executive says representatives of the National Association of Securities Dealers, which reviews securities advertising, have expressed their concern about such ads to leading online brokerages.

nasd regulation concern

Association officials could not be reached for comment, but NASD Regulation Inc. president Mary L. Schapiro raised the issue in a Feb. 25 speech.

“One step that both firms and regulators should take is to scrutinize ads carefully, and I will say that some of the ads I have seen are close to the edge,” she said. “Few people really believe that they’re going to acquire an island paradise by trading online. But often there is an underlying bandwagon mentality promoted and a message that investing is easy or risk free.”

Marketers argue that their ads are fair and are not encouraging irresponsible day trading.

“We think it’s being blown out of proportion,” contends Rob Livingston, marketing manager for Discover Brokerage Direct, the San Francisco unit of Morgan Stanley Dean Witter & Co. that aired the tow truck ad — which was recently pulled from rotation.

“We go to an extreme to show people a little humor,” Mr. Livingston says, “but the point is normal people can invest.”

Discover Brokerage spent $27.5 million on advertising in 1998, according to figures from Competitive Media Reporting, a New York ad tracking firm. More than half of that was spent on cable or local television.

The tow truck ad was pulled because it has run its course, says Bob Ellis, an account director for Discover’s agency, Black Rocket, in San Francisco. A campaign of five ads — including one that features trading teens on a helicopter — is currently running.

A new low may have been set by E*Trade Group Inc. of Palo Alto, Calif., which last week launched an estimated $50 million to $60 million campaign with a series of television ads that cheekily present online trading as an alternative to playing the lottery.

Regulators concede that advertising is protected speech and they can do little more than jawbone unless actual deception takes place.

As part of a wider crackdown on day trading, the Massachusetts Securities Division has filed an administrative action against day trading firms over marketing issues. It lodged a complaint against All-Tech Investment Group of Montvale, N.J., in December, contending that its marketing materials implied that customers likely would achieve financial independence.

All-Tech officials could not be reached for comment.

Last month the Massachusetts regulator brought a case against TCI Corp. of Irvine, Calif., which offers a day trading course. It criticized TCI for including claims in marketing material that its investment system would provide “six- to seven-figure income per year.”

Tim Cho, president of TCI, dismisses the charges as “totally false” and says all risks were fully disclosed.

Marketing executives for the major online brokers argue that their ads are humorous and entertaining, and they don’t guarantee that people will make money by investing. They deny they’re targeting day traders.

promoting day trading?

“Day trading is not something we’re promoting,” Discover’s Mr. Livingston says. “We try to avoid being promissory.”

A marketing executive for No. 1 online brokerage Charles Schwab Corp. says it tries to encourage disciplined, long-term investing.

The San Francisco company last year ran a campaign featuring black and white interviews with actual customers. In one commercial, a market-seasoned middle-aged couple talked about how they love to invest and once pulled to the side of the road to call their broker with a trade.

“They’re active traders but they’ve been in trading for a long time,” says Len Short, executive vice president for advertising and brand management for Schwab.

Partners & Simon of Boston handles those spots for Schwab, which spent $19.8 million advertising its online brokerage in 1998, two-thirds of which went to network TV, according to Competitive Media.

The broker now is creating ads featuring co-CEO Charles Schwab that encourage cautious investing, Mr. Short says. BBDO West in San Francisco handles those spots.

Another concerned cyberbroker is Ameritrade of Omaha, Neb., which weighs whether its commercials send a responsible message, says Peter Horst, vice president of marketing. “We’re very conscious of trying not to create a false impression of earning quick rewards.”

Ameritrade spent $14.1 million last year on advertising, according to Competitive Media, most of it on cable television. A recent spot featured a woman who takes a break from jogging to make a trade. Mr. Horst says he believes the ad is responsible because the character makes a point of saying she has been watching the stock for a while.

“We’re trying to make investing appear as approachable and non-threatening as possible,” Mr. Horst says. “So we don’t go out of our way to present possible pitfalls.”