The National Association of Investment Professionals (NAIP) is filing a complaint with the Federal Trade Commission claiming online discounter ads are deceptive and unfair.
The NAIP's attorney, William MacLeod, a partner at Collier Shannon Rill & Scott in Washington, D.C., says he's found some of the ads "don't come up to the standards of laws governing deception and substantiation." He declined to name the offending companies.
MacLeod, a former FTC director in the bureau of consumer protection, was set to present the evidence in October to the FTC.
"We've been told we can't sue online brokerage firms directly because specific brokers aren't named in the ads," says T. Sheridan O'Keefe, NAIP president and a Raymond James Financial rep in Minneapolis.
The NAIP, a 3-year-old trade group for retail investment advisers, would like to see an industrywide campaign to promote the image of the full-service broker, O'Keefe says.
Beginning in May, several SIA committees discussed possible responses to complaints about online ads. But the trade group isn't responding, a spokesperson says. "It's not our place to takes sides. ... It's a free speech issue."
Regulators began meeting this summer with online brokers and their ad agencies through a committee created by SEC Chairman Arthur Levitt Jr. In a speech to the National Press Club on May 4, Levitt announced that former advertising executive Jay Chiat would be working with the NASDR and industry leaders to "consider the public interest issues" raised by the ads.
In September, the NASD reported that the committee met three times and had two investor focus groups view some of the commericals. Ads that attack the ethics of full-service brokers were "ineffective and offensive," the NASD's report states.
The broker-bashing ads don't violate NASD advertising rules, but the regulator warned it "will closely monitor the portrayal of broker/ dealer and customer relationships in specific advertisements."
In addition, the NASDR will set up a new investor Web site about the risks of online investing.