US Broker Fined for Online Trading Failures

Mike Godfrey, Tax-News.com, New York

02 March 2001

TD Waterhouse, the second-largest US on-line brokerage, has been fined $225,000 by the New York Stock Exchange for failing to fulfil customers' orders during site down-time in 1999 and 2000.

"The firm at various times on 33 different trade dates was unable to process customer orders online," the exchange said. The online blackouts occurred during periods ranging from 2 minutes to 1 hour and 51 minutes between November 1998 and April 2000. The Exchange added that TD Waterhouse did not adequately inform its customers of alternative order entry systems, and failed to maintain telephone systems that were strong enough to handle stock orders that could not be filled online. The broker was also criticized for continuing to solicit new customers and advertise its online capabilities during the period when it had constant problems with its on-line capabilities.

A TD Waterhouse spokeswoman said that the software problems that caused the Internet failures had been corrected. It's no coincidence of course that the period during which the failures occurred was the peak of the Internet frenzy; and the problems have no doubt been corrected by the subsequent slump in demand without the brokerage needing to do anything extra.

During the period of TD Waterhouse's problems, said the brokerage, its online orders grew to 80 percent of its daily trades from about 44 percent. "The review period was one of explosive growth that was very challenging for us and our industry," the spokeswoman said. "We regret that customers may have been inconvenienced by the issues identified by the exchange."

TD Waterhouse consented to the exchange's findings without admitting or denying guilt, the Exchange said.

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