Another suggestion was to extend so-called suitability rules - those requiring brokers to make sure that investments are appropriate for their customers - to include day traders and online investors.

The judges let stand an appeals court ruling that blocked the state of Massachusetts from requiring brokers to make arbitration optional in disputes with investors.

The report urges Congress to take several actions to stem the abuse of the penny stock market, primarily by requiring brokers to disclose more information to customers.

True, the I.R.S. does require brokers and others to report on Form 1099 the total withholding, said Ken Hubenak, an agency spokesman.

One problem was state laws requiring brokers to deliver certificates to investors.

One involves discounts for on-line trading, which is generally cheaper than transactions requiring human brokers.

Federal and state securities laws require brokers, investment advisers, and their firms to be licensed or registered, and to make important information public.

The proposal would also require brokers who post investors' orders on an electronic communications network, or E.C.N., to do the due diligence.

The S.E.C., however, takes quite seriously violations of its rules requiring brokers to make sure companies have adequate financial information before making a market in their stocks.

This requires "brokers" to sell products from competing insurers.