Ms. WENZEL. You are welcome.

Senator COLLINS. I know this is extremely difficult for you, but I think that you can take a lot of comfort that by coming forward, you are sparing others the pain and the financial losses that your son experienced. So I really appreciate your testimony.

MS. WENZEL. Thank you, Chairman.

Senator COLLINS. Mr. Buchwalter.

TESTIMONY OF STEVE BUCHWALTER,1 ATTORNEY FOR AMY LE, FORMER CUSTOMER OF PROVIDENTIAL SECURITIES, ENCINO, CALIFORNIA

Mr. BUCHWALTER. My name is Steve Buchwalter. I am an attorney whose practice regularly entails representing investors against brokerage firms and brokerage firms against investors. A client of mine, Ms. Amy Le, was invited here today to tell you her stories about her experiences with day trading. Unfortunately, Amy's health has prevented her from being here today and I have been invited to tell you her story in her stead.

I recently read a Washington Post article entitled, "Day Trading's Showcase Victim," and that article essentially asked, where were the other victims? I have read the article, and I can tell you I have spoken to many of the victims. I know other attorneys who have spoken to many of the victims. And I believe Chairman Collins had it right. Most people do not like people to know that they have lost money. They feel stupid. They do not want to advertise that fact. So it is a situation where most people simply do not come forward. Day trading has been around for a while. In the older days, we simply called it churning. It has become popular recently with most of the investors making the decisions themselves, and it takes time for these problems to work their way through the system, and I am speaking of the legal system here. I can assure you, we are seeing more and more problems coming to our office every month. I would say, right now, approximately 10 percent of our cases contain at least some element of day trading in them. Make no mistake about it, a problem is out there and the problem does exist.

In general, the two biggest problems with day trading seem to be the lack of disclosure of the risks of day trading to the customer as well as the whole day-trading strategy and whether or not that is suitable for the investor. Quite frankly, most investors do not know the risks that they are going to be expected to put up with when they open up an account. We have seen trading that is just so unfathomable that we could not understand the risks, and we have been doing this for years.

In Amy's case, this was outright fraud. At the time she met her broker, Huan Van Cao, she was working part-time for minimum wage. She worked 1 day a week, made minimum wage, worked a Sunday. She was also a full-time mother with very minimal experience when it comes to investing. This was her first brokerage account. Mr. Cao, who was a smooth-talking, well-dressed man, walked into Amy's store and after a brief conversation he gave her his business card. The card identified him as senior vice president of a brokerage firm. He told her he was also an attorney. Amy was

very impressed, a stockbroker and attorney. She asked him, why would an attorney also want to be a stockbroker? His response was, it is just so easy to make money day trading. Then he went ahead and suggested that she open an account.

After several conversations going back and forth, she was invited to the brokerage firm of Providential Securities, where Mr. Cao worked. At first, she was very hesitant, and she even left very hesitant. After numerous phone calls from Mr. Cao, Amy did agree to meet at the office. He had a big office, right next to the president's. After all, he was the executive vice president of the firm. He proceeded to get out his computer, a couple clicks, showing her how much money there is to be made with just a click of the mouse.

Amy was very impressed, especially after he showed her some of his other clients' accounts. He went so far as to show her an account where he said there was a $1 million profit in it. She then agreed to open up an account and she signed a document which allowed Mr. Cao to place trades in her account without her prior authorization.

Her initial deposit was only $10,000. When she wrote out her check, her hands were trembling. Mr. Cao noticed that her hands were trembling and told her not to worry. He went so far as to say how fortunate she was to have someone like him trading for her. She invested the remainder of her life savings, $26,000, after she received glowing reports from Mr. Cao as to how much money she was making. It was a lie. She was losing money.

At the time, Amy was driving around in an old beat-up car. Living in Southern California, she wanted to have a car with air conditioning. She was ecstatic when Mr. Cao asked her between a Mercedes, BMW, and a Lexus, what kind of car do you like best? She asked Mr. Cao, "Is my account doing that well?" He said yes. He further told her that she should go out and start shopping now because it takes a little bit of time to buy a car. Again, at that time, she was really losing money.

Amy's monthly statements appeared to show the account was losing money, as well. Mr. Cao told her that because of the turnover in the account or the fact that because of day trading, by the time you get your statements, most of the positions are probably closed out anyway and that fact that the brokerage firm was miscalculating the value of her long positions, she was really making money. And the fact that she was continuously making money was consistently referred to her. All those statements were lies. The truth was, over $36,000 invested, she had lost $22,000 in just 3 weeks. However, based on Mr. Cao's assertions, she still thought that she was making money.

While she was still believing that she was making money, she made her last deposit. This last deposit was the life savings of Amy's mother. It was $12,000 and the money was earmarked to renovate Amy's grandparents' or her mother's parents' burial plots in Vietnam. Amy made this perfectly clear to Mr. Cao, and in fact, he wrote a letter to her saying how he understands how important this money is and reemphasizing how careful he is going to be. That same letter also talked about his successes with other clients.

Every time that Amy talked to Mr. Cao, she was falsely told that she was making money. In her eyes, it was strange that these statements that she was making money contradicted the monthly statements that she was receiving every month. She became very puzzled, very concerned, and she was doing whatever she thought she could to try and find out whether or not Mr. Cao's statements were true. She would look through every document she ever got, she would find names and she would call names. She would call the names on the statement. She would call the names on the faxes. She finally found someone that would talk to her. The person that talked to her said, "You are losing money."

When she confronted Mr. Cao with this, she was told that the person that she talked to was new. She had no idea what she was talking about, but if Amy felt uncomfortable, he would go ahead and buy out her account. She deposited $48,000. He offered to give her $48,000. He even had a contract written out. It was signed by both parties. Amy went to the offices of Providential in order to turn over the contract and get her check. At that time, Mr. Cao told her that he was not really going to go through with it. Amy became very upset and she started crying. Apparently, Mr. Cao took that as a personal affront. He saw that there was no more money to be made from Ms. Le and threatened that if she did not stop crying, he would lock down the building, call security to have her escorted out, and ruin her credit.

Amy immediately left, went home, faxed Providential a letter saying, liquidate my account and send me my money. They did do that. When all was said and done, she lost in excess of $35,000, which is almost completely her net worth or her life savings, in just 2 months. She also found out that Mr. Cao was not licensed as a stockbroker, nor was he an attorney. He also told her that he had the authority to investigate other firms on behalf of the NASD. That was not true, either. It had all been a lie. Amy realized that Mr. Cao was a predator and she was just his prey.

At that point, she contacted my office. We filed an arbitration with the National Association of Securities Dealers Arbitration Department asking for her money back. Providential, strangely enough, disavowed any knowledge of Cao's activities. The NASĎ awarded Amy all of her money back plus interest. The award was split up between the various respondents, including Providential. Amy did receive a partial payment of a little bit more than $13,000 when Mr. Cao filed for bankruptcy. She has not seen one penny of the rest of her award.

Amy feels like she did everything right. She invested with a licensed stockbroker. She visited the brokerage firm. Her broker guaranteed to make her whole when there were losses. When he did not, we filed an arbitration. The arbitrators awarded her all of her money back, plus interest. She still has not seen her money. Amy, like other investors, had no idea what she was getting into, no idea. Her $48,000 deposit bought almost $1 million in securities in just 2 months. We have seen cases where an account with only $100,000 in it bought over $200 million in securities in just 1 month-$200 million. That is a trade every 1.3 minutes. We have seen investors' losses so high where even the firm cannot make

that particular instance, the SEC stepped in and closed the firm down. Somebody is paying for these people's losses. Maybe it is the brokerage firms. Maybe it is us as taxpayers. There is a problem here and it will not go away without your assistance. Thank you. Senator COLLINS. Thank you, Mr. Buchwalter. I hope you will convey to Ms. Le our hope for her speedy recovery.

Mr. BUCHWALTER. Thank you.

Senator COLLINS. Thank you for your testimony. Ms. Margala. TESTIMONY OF CARMEN MARGALA,1 FORMER CUSTOMER OF ALL-TECH DIRECT, OCEANSIDE, CALIFORNIA.

Ms. MARGALA. Good morning. My name is Carmen Margala. I reside in Oceanside, just north of San Diego, California, and I am a former client of All-Tech Investment Group. Prior to my experiences at All-Tech, I bought and sold some stocks, mostly on a longterm basis, but had never engaged in day trading of securities.

In approximately August 1998, I saw an All-Tech television commercial which made it appear quite easy to make money and achieve financial independence as a day trader at All-Tech. The commercial featured Barry Parish, the manager of All-Tech's San Diego office and the ad stated that I could start with as little as $10,000.

At the time, I was not employed, I had no income, and I was looking for a new profession, so I contacted Mr. Parish by telephone and then met with him at the All-Tech office. Mr. Parish explained that people make money by trading and scalping the difference between the bid and the ask price of a stock, and then demonstrated this on a computer program. When I asked whether people were making money doing this, he told me that they were.

Mr. Parish provided me with forms to open an account at AllTech, and when I returned with the forms, Mr. Parish told me that I needed $20,000 to open the account. Neither Mr. Parish nor anyone else ever discussed risk or my tolerance for risk, my background, goals, or objectives, past experiences, my financial position, or anything else other than how much money I could deposit in the All-Tech account. Since I did not have much money or significant net worth, I opened the account with $20,000. I paper traded my account for 1 month and then began live trading so that I could earn an income.

I experienced problems with the trading equipment that All-Tech provided to us. For example, I repeatedly experienced inaccurate quotes. At times, the quotes appeared to have been delayed as much as 13 minutes. All-Tech set up a special computer line for Mr. Parish which would at least provide him with accurate quotes, but even these were sometimes behind the market. The inaccurate quotes resulted in losses in my All-Tech account.

The trading software or system also allowed the purchase of any amount of stock, regardless of what was in my account. Without knowing it, I generated a number of margin calls, which Mr. Parish then arranged for other clients to cover. Further, during much of the time I was at All-Tech, the system could not even show me the status or balances in my account. To encourage trading, the up

graded computers were given to those persons that executed the highest number of trades.

The atmosphere in the trading room at All-Tech was like a circus. Mr. Parish would sometimes play games, directing clients to buy or sell. If there were losses, Mr. Parish would cover the losses. If there were gains, they would end up as a credit for the benefit of Mr. Parish.

Mr. Parish allowed one All-Tech client to trade other All-Tech clients' accounts. A fellow All-Tech client told me that Mr. Parish personally provided him with clients' accounts to trade. Neither of these people had a broker's license of any kind.

Mr. Parish would sometimes stand in front of his computer in the All-Tech trading room and shout out to the room or to an individual client to load to buy. Other times, Mr. Parish would give instructions to get ready to sell stocks which he had picked.

All-Tech applied enormous pressure to trade our accounts. Mr. Parish would sometimes stand next to me or other All-Tech clients who were seated in the room and tell us what to trade and when to trade. In addition to the pressure to constantly trade, Mr. Parish made it very difficult to focus upon what we were doing.

Other forms of trading pressure at All-Tech were indirect. For example, Mr. Parish oftentimes discussed other All-Tech clients and made statements such as, "He just comes in to take up space. I need people that trade."

All-Tech also pressured its clients to cover other clients' margin calls. At times, Mr. Parish simply shouted the margin call request across the trading room. These requests were not limited to clients within All-Tech's San Diego office. The added pressure of trading with margin money loaned by other clients was very stressful for

me.

Eventually, I realized that what All-Tech had told me about making money and day trading was false and I left All-Tech. Unfortunately, before I left All-Tech, I sustained tens of thousands of dollars in losses, due in part to the commissions which All-Tech realized from my account. Thank you.

Senator COLLINS. Thank you very much, Ms. Margala. We really appreciate your sharing your experience so candidly with us today. Ms. Harlacher, please proceed.

TESTIMONY OF SANDRA HARLACHER,1 FORMER CUSTOMER OF ALL-TECH DIRECT, SOLANA BEACH, CALIFORNIA

Ms. HARLACHER. I reside in San Diego, California, and am a former client of All-Tech Investment Group. Prior to trading at AllTech, I had minimal investment experience and I had never day traded or short-term traded securities.

In early 1997, I saw a couple of different All-Tech advertisements on television. The ads made day trading look easy and simple. The ads stated that All-Tech could level the playing field with the professionals and show me everything I needed to know to make money as a securities day trader. The ads portrayed day trading as a new career which would give me the opportunity to earn as much money as I wanted and become financially independent for