Technology's rapid advance offers both opportunities and risks for today's investors.
But they can come out on top if they keep up with the changes, U.S. Securities and Exchange Commission Chairman Arthur Levitt Jr. said Friday."In the technological revolution, the big winners are investors," Levitt said during Sen. Bob Bennett's third annual Financial Services and Technology Conference at the Little America Hotel.
Levitt said the nation's highest economic priority is to keep investors confident of the market's integrity, and one danger to that confidence is the so-called year 2000 problem.
The problem results from the fact that many computers use only the last two digits to indicate a year. Such programs may interpret the year 2000 as the year 1900, leading to system failures or errors.
"Any company that neglects this looming problem is simply asking for trouble," Levitt said. "To spur every part of our system into action, we have put America's securities industry on notice: Every financial organization that we regulate will be held accountable for preparing for the year 2000. There will be zero tolerance for in-action."
Levitt said the SEC is proposing that large brokers file two reports with the commission outlining their plans to deal with the problem.
"The goal of this proposal is not to second-guess broker-dealers, but to ensure that they are putting strategies in place to anticipate the kinds of problems that will inevitably develop," he said.
Levitt said he is confident U.S. businesses will adapt to this and other changes technology is bringing to the marketplace.
For example, he said, the Internet is giving individuals access to information that only large institutions had in the past. Increasing numbers of companies are making their annual reports, press releases and other documents available on World Wide Web sites, and people can trade shares through a host of online services.
But swindlers also find their way into cyberspace, Levitt said, using it as a new medium to commit the same old kinds of fraud. He said investors need to watch out for scams, and the SEC is trying to help by posting investor alerts on its Web site and placing warnings in newsgroups.
The commission's "cyberspace surveillance" also is fighting the problem, he said. Through it, the SEC discovered and cracked down on a $20 million Ponzi scheme operated from Salt Lake City.
"Scam artists are getting clever with technology, but they're just exploiting the same old human weakness: the impulse to get rich quick," Levitt said.
He said the SEC also is looking for ways to use technology to solve regulatory problems.
"American shareholders of foreign securities frequently don't receive proxies. Under American law, we cannot force foreign issuers to send them to our citizens," Levitt said.
"One intriguing way of dealing with this issue may be to get the information onto the Internet. It's a fast, cost-effective way to disseminate the proxy information."
Levitt said he will put together a round-table meeting on these and other technology policy issues this spring. But he stressed that investors must recognize their reliance on the flawless, instant operation of complex technologies on a global scale.
"Sometimes, adapting to change will mean adjusting our methods of regulation," he said. "Even more often, that will mean adjusting our way of thinking . . . But the ability to change has always been the hallmark of America's markets and America's entrepreneurs. We have succeeded by recognizing the need for change, and by responding to it."