Concerned that online investors may be overextending
themselves to purchase volatile Internet stocks, many online brokerages are
imposing new restrictions on using borrowed money to pay for them.
Broker Salomon Smith Barney Wednesday put new restrictions on using margin accounts to purchase shares in 18 companies, including Yahoo! Inc., America Online Inc. and eBay.
DLJdirect is also limiting its
customer’s borrowing. The company said its clients can only borrow 50
percent of their portfolio’s value and 90 percent of the value of bonds
they hold.
Industry experts say the moves reflect brokers’ concerns that individuals
are overextending themselves financially to purchase Internet stocks and
other high-flyers.
They say until the prices of Internet stocks stabilize, this is the only
way online brokers can protect themselves. Experts say it’s good for online
investors because it helps guard against moves they might regret later.