Tech know-how and stock interest fuel brokerages

Increasing interest in share ownership and familiarity with technology have made online share dealing a big growth area.

In the US, market industry figures indicate that use of online broking services has increased six-fold in the last year.

But the Central Bank has sounded a note of caution. It warns Irish investors who wish to buy and sell shares through foreign online stockbrokers that the caveat emptor rule applies.

The Bank regulates Irish stockbrokers and foreign brokers who apply for authorisation to operate in the Irish market. And under EU rules brokers who are regulated in other EU countries can operate in the Irish market after the Irish Central Bank has been informed.

But the Central Bank has no role in regulating foreign brokers offering Internet services, even though the brokers are taking money from Irish customers.

It advises Irish investors who want to trade through foreign websites to check on the company they want to deal with to ensure that it is authorised in its own country.

Authorisation can be checked with the stockbroker regulator in the country concerned - in the US the relevant regulator is the Securities and Exchanges Commission, while in the UK stockbrokers are regulated by the Financial Services Authority. And investors should check that there is an investor compensation scheme in place that will apply to Irish (foreign) investors if things go wrong.

The Central Bank spokesman pointed out that if the firm was operating in a market outside the EU, Irish investors would not be covered by the Investors Compensation Act and that it could be expensive for an individual investor to chase up compensation from foreign brokers.

As in all transactions on the Internet, share dealing clients should satisfy themselves that the site is secure - both from potential fraud and from invasion of privacy - before they do business.

This is best achieved by dealing with well-known and reputable stockbrokers or other companies offering online share dealing services or seeking recommendations from friends or colleagues.

Investors should be very wary of disclosing financial or credit card details on the Internet without first establishing that the broker is authorised and the site is secure.