SEC gives nod to online trading system

The Securities and Exchange Commission has given conditional approval for a New York microbrewery to trade its stock on the Internet in what financial analysts say is a significant test case for online securities transactions.

The Spring Street Brewing Company voluntarily suspended trading on its Net-based bulletin board system last week after SEC lawyers called with legal and technical questions. But in a letter to the company disclosed this week, the agency laid out its conditions for Spring Street to resume online trading, saying the firm should have a licensed agent handle investor payments and post notices on its Web site warning that stock might be difficult to sell because it is not traded on a standard exchange.

"The commission staff has suggested certain modifications to our trading system, and we are happy to comply," said Andrew Klein, the microbrewery's founder and CEO, adding that about 100 firms have called him for advice about Web trading. "We will modify our program and bring our activities in line."

Financial analysts say the case is being watched closely by other companies seeking to trade their stocks directly over the Internet to avoid brokerage fees and other costs. Spring Street has gained a reputation as a leader in this area after becoming the first company to make an initial public offering on the Web last year.

Spring Street opened its Wit-Trade bulletin board March 1 to let the public buy and sell its common stock through its Web site. But it voluntarily suspended the operation because of SEC concerns about trading by a company without a broker's license and security questions involving the possibility of fraudulent claims through email transactions. Spring Street said it will address those issues by using an independent agent, such as a bank, to receive payments from investors.

Final clearance for the bulletin board, named after the microbrewery's Wit beer, is expected to take several weeks. Discount brokerage house Charles Schwab & Company and CompuServe have announced significant new investments in online trading systems over the past week as well.

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