Securities and Exchange Commission Chairman Arthur Levitt Jr. told a Senate panel yesterday that an ongoing investigation of day-trading firms has uncovered myriad marketing lies and bad loan policies at dozens of firms that provide the workstations that link day traders to Wall Street.

The sweep, conducted with the National Association of Securities Dealers (NASD), concluded that more than 80 percent of the firms have "questionable marketing practices," Levitt said. Further, half the firms examined routinely allow customers to lend one another money to meet federal "margin" rules that limit the amount of money people are allowed to borrow to buy stocks.

Day traders frequently hold stocks for just hours, if not minutes, seeking to profit on small changes in share prices.

Levitt, who likened day trading to gambling, declined to identify the firms under investigation. But he said the probe, which eventually will cover 67 day-trading firms, has found possible violations of rules on fair advertising, proper lending, adequate brokerage capital, short-selling of borrowed stock, record-keeping, and supervision.

Mary L. Schapiro, president of the NASD's regulation unit, called for a ban on excessive-loan practices. And she pushed for support of a NASD plan to make day-trading firms responsible for screening customers to determine their financial condition, experience and tolerance for risk.

"We need new regulations," agreed Sen. Susan Collins (R-Maine), chairman of the permanent subcommittee on investigations, who called the hearings.

The NASD and SEC findings were in line with a report released in early August by the North American Securities Administrators Association, which concluded that 70 percent of day traders lose money.

"We wouldn't be here today if we thought that the current rules were being met by the industry," said Peter Hildreth, president of the NASAA.

The day-trading industry's trade group, the Electronic Traders Association, yesterday countered with a study showing that 56 percent of day traders lose money in the first three months but 64 percent make money after that. The study was done on trades at Momentum Securities, whose president, James Lee, also runs the trade group.

Saul Cohen, an attorney for the group, accused the regulators of seeking media attention.

"Two out of three [day traders] will make $28,000 a month," Cohen said. "The odd man out will lose." He also said day traders help the markets by providing an influx of cash that keeps stocks prices from fluctuating wildly.

But members of the panel appeared unconvinced. "You have better odds in Vegas," said Sen. Max Cleland (D-Ga.). "It's not roulette. It's Russian roulette."

CAPTION: SEC Chairman Arthur Levitt Jr., left, talks with Robert Colby, deputy director of the SEC's market regulatory division, at a Senate hearing on day trading.