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Merrill Lynch To Introduce Online Application Procedure for ML Direct

Caroline Maxwell, Investors Offshore.com

21 February 2001

In a move unprecedented in the full service brokerage industry, Merrill Lynch announced recently that it would be introducing a paperless brokerage application for its Merrill Lynch Direct account, due for release in the second quarter.

Speaking at the sixth annual Internet Update Conference of the Securities Industry Association, Jeff Alexander, the company's vice-president and senior counsel, said that although there has not, as yet, been great demand for the service from investors, he believed that the move will ultimately prove cost effective for the firm.

And he could be right. Although this type of application is a relatively new development in the financial services industry, initial forays into real time online account application look promising - E*Trade Securities, who took the plunge this time last year, revealed that the internet based system has reduced their costs in this area by approximately 75%. CSFBdirect and Web Street Securities have also made the transition but other firms, such as Charles Schwab, are taking it slowly, offering the facility only to existing customers wanting to open additional accounts.

However, there are some concerns that in implementing online account opening, firms could face fraud, record keeping, technology and data integrity issues. Alexander admitted that there had been doubts within the company: 'Some of [Merrill's] people in business development have been wary about the service. They felt that clicking 'I agree' did not constitute a signature. E-sign regulation is neutral as to how a signature is done,' he said.

In an interview with Financial NetNews, Aegis Frumento, a partner at Singer and Frumento, and panelist at the conference, suggested that there were various ways around the fraud issue, including working with a digital certification authority, or asking applicants for additional information, which could then be verified in real time by a credit bureau. Merrill is understood to have opted for the latter.

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