Lots of investment news this week, but the most significant news of the day and old news by Saturday (I actually write this column on the Tuesday before) is the announcement by several of the online trading firms in the United States that they have dropped to no commissions for trades.

Anyone with common sense knows that when it sounds too good to be true, it usually is. These online trading firms have stated that they will make up the revenues in additional advertising, cost efficiencies, by continued steering business to certain third-party intermediaries and by providing value added services.

What they don't say is that the pressure is now on for them to meet quotas and make up this lost revenue. Where many of them have already gotten poor ratings in customer service (see thestreet.com's recent on-line brokerage customer survey), now they will attempt to sell to every warm body who clicks in.

While the customer may think this is great, in the long run, it may lead to increased processing mistakes, less strict resolution of questionable activities and more sales tactics by outside vendors who advertise on the broker Website. They will continue to heavily promote margin lending. In late March of 2000, margin debt was at an all time high of 300 billion dropping off in April as millions of margins calls were sold off.

Buying investments on margin The margin factor has been discussed in this column before. It is a terrific revenue enhancer for brokerage firms, as much as 30-40 percent in some cases.

Borrowing from your broker to buy investments is a very risky business. The underlying collateral -- the value you have borrowed against) of the stocks or mutual funds etc. change in market value every minute of every day. The brokerage firms have strict limits on the amount they will lend you, no more than 50 percent of the current market value and in many cases no more than 20-30 percent. You pay interest and this loan; usually somewhere around two to three percent above the prime rate, current margin rates are around 10.75 percent. As you have no doubt just realised this is big money for the broker-dealer. If you decided to cut your trading commissions to zero, where would you make it up? Small investors petition the SEC Recently, there has been a significant increase in the number of clients filing complaints with the NASD and instituting lawsuits against some of these firms. The overwhelming reason is the brokerage firm selling out the client(s) portfolio to meet margin calls without notification (margin call).

As you will recall, if the value of the underlying investment falls in value below margin percentage allowed, if you do not meet your margin call by contributing additional cash of investments, your position is gone. Many small investors were overconfident in this never ending bull market and got caught with huge losses during the April volatility.

Current margin contracts provided to clients by just about all investment firms state that they are under no obligation to notify a client of a margin call. It is doubtful that any of the consumer complaints and lawsuits will be resolved in their favour. Another case of know your investment advisor well; read the fine print; it is there; and don't risk money that you don't have.

EY and E*Trade team up Another incredible piece of news that raised few investor eyebrows was E*Trade's announcement that they had teamed up with the Big Five Accounting Firm Ernst & Young to provide comprehensive financial planning to their on-line clients.

In the continuing paradigm shift (don't you just love all those corporate buzzwords) in financial services, this is amazing news and a major coup for E*Trade. They intend -- no doubt -- to compete head to head with Charles Schwab. The added credibility of a Big Five accounting firm-turned-financial services firm will be hard to beat. Look for this combo to grow significantly in the next few years. The only worm in the apple could be the appearance of conflict of interest with EY, since their other arm does audit huge numbers of publicly held companies. The investing consumer wins on this one.

Mock Portfolio Lots of activity and a positive bottom line for the first time in a couple of months. Rambus split four for one and had a huge jump into positive numbers.

Analysts are calling long on this one now.

The FTC agreed to allow the merger of Pfizer and Warner-Lambert. We'll see if the combination pushes the value even higher.

We are going to shake the portfolio up next week with major changes, starting with some interactive investing, including options; exchange traded mutual funds, and an investment policy.

The Financial Planning Association/Bermuda is proud to be a sponsor of the IBC Life and Offshore Annuities Conference June 26. Two of our members, Monica Jones of Appleby, Spurling & Kempe and Michael Lima of Sun Life are distinguished presenters.

Under no circumstances does the information in this column represent a recommendation to buy or sell stocks or any other investments. Readers needing specific assistance should seek professional advice from their financial advisor.

Martha Myron CPA CA is a Bermudian, a Comprehensive Financial Planner, a NASD Series 7 licensed investment broker and a US tax practitioner. She is Programming Chair for the Financial Planning Association/Bermuda (formerly IAFP). Questions regarding this article may be sent to her at 234-0290 or email: marthamyron ynorthrock.bm CHART