SEC Bans Day Traders, Prostitutes from Hot Tubs

Drowning Deaths and Prostitution Concerns Spark Action

The Securities and Exchange Commission has announced sweeping regulations that ban day traders from buying and selling stocks while immersed in a hot tub.

The new regulations come on the heels of several deaths among stock traders around the country who drowned in their hot tubs while trading and the arrests in New York City of executives at a brokerage firm who are accused of providing prostitutes to assist hot tub traders.

One death, in La Jolla, California, was blamed on a heart attack brought on my water that was too hot, although paramedics called to the scene said a woman had been in the hot tub with the trader at the time of his seizure. In several cases, victims' families saw their portfolios substantially wiped out because stocks a trader owned at the moment of death plummeted in value immediately afterward.

"We're issuing this regulation to assure an orderly market in equities and to control the potential for abuses by brokerage firms who cater to day traders," said William H. Donaldson, SEC chairman. "These deaths and the losses in which familes saw their wealth wiped out should never have happened. We don't want another trader to die in a hot tub." Donaldson's appearance at a news conference to announce the regulations underscored the SEC's concern.

The new rules come on the heels of the widely publicized death of Arnold Miller, 56, a wheat farmer in Larned, Kansas, who apparently drowned last month when he fell asleep while day trading in a hot tub in his farm workshop. It was several days before his family discovered that just before nodding off and slipping beneath the waters, he purchased $750,000 worth of a high tech stock. Within an hour of the stock purchase, the company, Wonderful Semis of Daly City, California, revealed that it had uncovered massive accounting fraud and fired its president and chief financial officer. The stock plunged. By the time Miller's family was able to discover and close the trade 10 days later, losses topped $500,000.

Miller's death and the family's financial loss led to Congressional hearings at which it was revealed that some brokerage firms operate trading rooms where rows of hot tubs are equipped with banks of trading screens and scantily-clad young women join traders in the water as they buy and sell stocks.

The revelations prompted Elliot Spitzer, New York State attorney general, to send in undercover investigators who posed as day traders at the offices of Fast Trades.com in lower Manhattan. That ultimately led to a raid in which executives of the firm were arrested and charged with soliciting prostitution and a dozen women were hauled from hot tubs and charged with engaging in prostitution.

The raid, which occurred while the stock market was open, prompted several day traders who were at the firm that day to file a lawsuit against Spitzer and his investigators, alleging that the pandemonium of the raid disrupted their concentration and caused them substantial financial losses.

The new SEC rules mandate that anyone who opens and closes a stock trade within the same day cannot do so while immersed in water that covers the body higher than the navel. Securities lawyers said that rule would appear to permit someone to to execute day trades while sitting on the edge of a hot tub or slightly below the edge.

The rule limits the number of people in a hot tub who open and close a stock trade in the same day to one person, unless the mean temperature of the water during the course of the day is below 75 degrees Fahrenheit.

"These rules are a sham. What is needed is an outright ban on hot tubs in any venue in which equities are traded," said a spokeswoman for the Break the Glass Ceiling Foundation, an advocacy group for women on Wall Street. "Hot tubs in trading rooms in whatever form are an insult to women," she said. "They might as well bring back the boom-boom rooms."

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