In a speech delivered in Washington, SEC chairman Arthur Levitt warned many online traders may not be clear about what they could be letting themselves in for.

He stopped short of calling for new regulation, but he called on online brokerages to more open with investors.

"Talk in realistic terms; let them know their options; and focus on the quality of your disclosure," he said.

He also told online brokerages to be more responsible and realistic with their advertisements.

"Some online firms' advertisements more closely resemble commercials for the lottery than anything else," he said.

Cyber-force to fight fraud

Mr Levitt said that he was doubling the size of the so-called "cyberforce" to 125. The team of attorneys, accountants and analysts surf the Web to ferret out fraud.

He asked Congress for $11mn to fight online fraud.

On Tuesday, a Republican senator, Judd Gregg of New Hampshire, proposed increasing the SEC's budget by $5.5mn next year to help the agency fight investment fraud on the Internet.

Investment inexperience

Mr Levitt urged online investors to be responsible

Mr Levitt said: "I am concerned about the great influx of new traders on the Internet and that they may be trading in a way which does not match their goals and resources."

Mr Levitt went on to say investors should not skip using what he referred to as 'elbow grease' when purchasing stocks, in other words they should research a company before buying into it.

He urged investors not to hold company shares for only a day but instead to see these as longer term purchases.

Be warned

Online day traders could be scorched by their approach, he warned.

He cited examples of those who lost tens of thousands of dollars, money they could not afford, in deals which had left them in crippling debt.

He was also concerned about the media and film industry coverage of those involved in the stock markets in which the adventurous investor was cloaked in a kind of machismo.

It was important, Mr Levitt said, that all online traders were clear about what they could be letting themselves in for before placing costly, even disastrous, share orders on the Internet.

Online trading soars

Online investors broke trading records in April

Mr Levitt's comments came as a research firm announced that the volume of online trading increased 40% in April.

Onlline investors executed an average of 630,000 trades a day in April compared to 450,000 trades the month before, said analyst Bill Burnham of Credit Suisse First Boston.

Mr Burnham attributed the increase in online trading, in part, to investors buying shares of companies that do business on the Internet.