Investors could expose themselves to huge losses when trading in securities over the Internet because of ill-defined rules governing sales contracts, according to an international commerce expert.
'In securities trading, when something does go wrong, millions of dollars can be involved and you had better be sure you have adapted your deal to use the correct trade terms,' said Professor Jan Ramberg, former chairman of a working group on international trade standards.
According to Mr Ramberg, trading standards for traditional transaction methods defined clearly the parties' respective obligations and reduced the risk of legal complications.
However, rules governing Internet trading were vague and, unless specifically defined, investors were not covered for loss of scrip, disputes over handling costs, or delivery delays.
Mr Ramberg's group last month completed an updated version of Incoterms - standard definitions for cross-border sales contracts prepared by the Paris-based International Chamber of Commerce (ICC). Incoterms 2000 become effective on January 1.
Addressing a seminar in Hong Kong, Mr Ramberg said questions remained over the point at which liability for a product or service purchased over the Internet passed from seller to buyer.
'It may be necessary to reflect this change in trading patterns in future Incoterms, as it's only currently reflected to a small degree,' he said.