Latin American Capital Markets

INTERNETTECHNOLOGY AND THE DEVELOPMENT OF SECURITIES MARKETS 81• The effort of markets and intermediaries to direct investors to certain hyperlinksbut not others.Liability for Internet communications during the offering process is of specialregulatory concern. When an issuer is engaged in a registered public offering, both theissuer and intermediaries participating in the offering face restrictions on the communicationsthey can make to potential investors.That an issuer is engaged in a publicoffering may affect what may be presented on its website or what may be the subjectof a hyperlink. Laws also limit certain communications during an offering so as notto influence investors with materials outside the prospectus. 15 Although regulatorsshould be aware that issuers and intermediaries could use the Internet in novel waysto communicate with investors, the regulators may want to ensure that issuers andintermediaries consider carefully the content of the information available on theirwebsites or hyperlinks during the offering process. Likewise, issuers and intermediariesshould be aware that regulators could construe hyperlinks and the content of websitesas illegal communications during the offering process.Day TradingDay trading has only recently become a topic requiring the attention of securities regulators.Day trading is popular because it allows the trader to take advantage of marketinefficiencies and volatility. For a long time, day trading was the province of professionaltraders, banks, and investment firms. Howeven the Internet and significantdevelopments in the order-routing capacities of financial service providers led to anenvironment that made day trading feasible and attractive for retail investors.The high risk of loss of capital is the reason why investor protection is theprimary regulatory concern with respect to day trading. As soon as day trading becameavailable to retail investors, it became apparent that, when undertaken withoutsound knowledge of markets and trading conditions and without sufficient capital, itcould potentially result in serious financial difficulties for the investor (see, for exam-15 In many jurisdictions, such as the United States, the first stage of the public offering process is the prefiling period.During this period, no written or oral offers of the security are permitted and no activities (written or otherwise)may be undertaken by the issuer that might arouse investor interest in the securities. During the offering period(which generally commences once the prospectus has been filed with the regulator and ends once the regulator declaresa prospectus effective), the issuer and underwriters may solicit indications of investor interest, but may not sellany securities. Any written solicitation efforts during this period must be made by means of a preliminary prospectusthat complies with the applicable securities laws. Finally, during the sales period, offers and sales may only be madeusing the final prospectus, a copy of which must be delivered to each investor before or at the same time as the writtensale confirmation.Copyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub