New bill may target financial spielsters on cable television.

New state legislation designed to protect California investors from shady stock brokers could be amended to cover brokers who advertise on cable television, said bill drafters.

"We're looking at it. We're working with the (federal) Department of Justice on just how to increase regulation of the television brokers," who often tout their toll-free telephone numbers via television, said Richard Steffen, chief of staff for Assemblywoman Jackie Speier, D-San Mateo, who introduced the broker disclosure bill.

"We've had success in regulating 900 numbers on television in California, so I see a parallel," he said.

Steffen said the possible amendments, which have not been hammered out, were prompted by a story in the Business Journal last week which reported that securities industry watchdogs are questioning whether there is sufficient regulatory oversight of brokers and investment advisers who advertise or appear in lengthy infomercials on cable television.

For instance, in Los Angeles, local station KWHY-TV Channel 22, receives most of its revenues from an estimated 50 brokers and investment advisers who buy slots of time to advertise their fiscal wares. Securities experts caution that some advertisers may not be registered with the correct federal or state agencies and, even if they are, may be subject to current investigations.

Amendments designed to increase disclosure of television brokers would be added to A.B. 729, introduced in late February by Assemblywoman Speier. The bill would require all brokers and investment advisers to notify their clients in writing of state Department of Corporations phone numbers that clients can call to find out if their broker has ever been subject to disciplinary actions in California or other states.

"This bill speeds up the access to information and, in addition, provides more information -- not only actions taken in California, but other states," said Tim LeBas, senior corporations counsel with the state Department of Corporations, which is working on the bill.

Because the bill currently requires only notification to clients in writing, it may not be stringent enough to protect investors who call brokers' toll-free numbers. For instance, investors may pledge their money to a broker over the phone before they receive written notification of the Corporations Department's disclosure number.

"We'll probably have to amend the bill to provide oral notification, but is that sufficient regulatory oversight for these television brokers?" said Steffen.

Under the current version of the bill, the department will offer consumers state-specific information, such as how long a broker has held a California license, and other data provided by the National Association of Securities Dealers, such as disciplinary actions taken in other states.

"The state must strengthen public disclosure laws to provide consumers with information they can use to protect themselves from bad brokers, products and investments," said Assemblywoman Speier. "My bill arms consumers with the data they need."

Speier's staff is expected to meet with representatives of the brokerage industry in "working groups," to discuss the bill and the amendments, in order to hammer out any opposition some brokerage firms may have to the bill.

Department counsel LeBas is currently working on two other sets of amendments which would give A.B. 729 "more teeth," by beefing up the department's authority to deny, suspend or revoke a broker's license based on prior orders of a regulatory body including the Securities and Exchange Commission and the NASD.

One amendment would allow the department to go after broker-dealers who had repeatedly violated rules in other states or been subject to prior orders from other regulatory bodies, even if the orders were several years ago.

Currently, LeBas said there are regulatory "loopholes" limiting the department to actions against brokers who are subject to current disciplinary orders, not those in the past.

For instance, if A.B. 729 passes, a regulator could say, "Sorry, we're going to pull your license right now, you've had 10 violations in Kansas and one in Florida," said LeBas. "So, the department could go after repeat violators by suspending or revoking a license."

The other proposed amendment addresses confidentiality of records during current investigations of brokers by making it tougher for a broker under investigation to find out the names of those who filed complaints.

The bill and the proposed amendments, which are expected to be added after the bill is in circulation for 30 days, will represent the "carrot and stick approach," said Steffen.

"Just because you disclose (an 800 number to a client) doesn't let you off the hook. This gives the department more authority to follow through," he said.

A lobbyist for retired persons, many of whom are targets of bad brokers or investment advisers, said his group may support A.B. 729.

"We're very interested in this issue. We're familiar with their motives (Speier's supporters), and it would be something we'd support," said Bob Holub, lobbyist for the American Association of Retired Persons. "The things we see around the country, the fraud and abuse, seems to catch seniors. They are the ones with the savings, so they are the prey."