FC: Rep. Tauzin to SEC: Don't regulate dot com financial sites

[Declan McCullagh <declan () well com>]

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FOR IMMEDIATE 
RELEASE: 
CONTACT: Ken Johnson or Peter Sheffield
Tuesday, June 12, 
2001 
202.225.5735

Tauzin Warns SEC:  Don t Regulate
Financial Internet Portals

Washington (June 12) In a strongly-worded letter, House Energy and Commerce 
Committee Chairman Billy Tauzin (R-LA) today warned the Securities and 
Exchange Commission (SEC) against regulating financial Internet portals 
that make investment related information available to consumers.

Absent direction from Congress, there is no basis for the SEC to extend 
regulation to Internet portals, Chairman Tauzin reminded the agency in the 
letter sent to Acting Chairman Laura Unger.

            The SEC has had a regrettable tradition of attempting to 
regulate in areas over which it lacked jurisdiction, the letter 
continues.  Internet portals should not become part of this tradition.

(Attached below is a copy of the letter sent today to SEC Acting Chairman 
Unger.)

June 12, 2001
The Honorable Laura Unger
Acting Chairman
United States Securities and Exchange Commission
450 5th Street, N.W.
Washington, DC 20549

Dear Acting Chairman Unger:

            I am writing in reference to the Portals Roundtable the 
Securities and Exchange Commission (SEC) held on May 23, 2001.  The SEC 
needs to be careful not to create the impression that it is considering 
regulation of Internet portals. Internet portals do not fall within the 
jurisdiction of the SEC.  Absent direction from Congress, there is no basis 
for the SEC to extend regulation to Internet portals.

            Under the Securities Exchange Act, a person is subject to 
broker-dealer regulation if that person is engaged in the business of 
effecting transactions in securities for the account of others.   Portals 
are passive vehicles that aggregate and make investment related information 
available to their users.  This provision of information is at the heart of 
the Internet revolution.  It has served to enhance the ability of 
individuals to participate in financial markets with a sophistication that 
was unimaginable only a few years ago.  It is no coincidence the rise in 
individual participation in the markets in the past decade parallels the 
growth and acceptance of the Internet.

Any attempt to sweep Internet portals into the scope of Federal securities 
regulation is unwarranted.  Portals do not recommend specific 
securities.  Nor do they take action involving brokerage accounts or 
securities transactions.  Suitability obligations and other investor 
protection concerns simply do not arise.

In addition to financial content, portals often provide advertising space 
for financial services providers in the same manner they display 
advertising from non-financial services businesses.  Many portals rely on 
advertising revenues because they provide financial information to their 
users for free.  Just as online brokers are subject to the same regulatory 
regime as traditional brokers, Internet based financial websites should be 
treated no differently than traditional counterparts in print, television, 
and radio media.

Not even a generous reading of the language effecting transactions in 
securities would sweep in the activities of financial portals.  The SEC has 
had a regrettable tradition of attempting to regulate in areas over which 
it lacked jurisdiction.  Internet portals should not become part of this 
tradition.

Sincerely,
W.J. Billy Tauzin
Chairman



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