FRAMINGHAM (05/05/2000) - NASD Regulation Inc., the regulatory arm of the National Association of Securities Dealers Inc., last week censured and fined ETrade Securities Inc. $20,000 for its slow response to the regulators' requests for information about customer complaints.
ETrade settled the matter without either admitting or denying the allegations.
According to NASD Regulation, on 17 occasions late last spring, ETrade, based in Menlo Park, California, failed to respond to the agency or failed to respond promptly.
"Prompt response to regulators' inquiries about customer complaints has to be front and center for all firms," said Barry Goldsmith, NASD Regulation's vice president of enforcement.
ETrade acknowledged that there was a problem but said in a statement that the issue has been resolved. Phone calls weren't returned by press time.
The rate of customer complaints increased from one for every 3,877 executed orders in January 1999 to one for every 2,925 orders in March of that year.
However, by July, that number was down to one complaint received for every 6,497 orders, the company said. Meanwhile, the time ETrade took to respond to NASD Regulatory requests was brought down to two weeks.
The company said the cause for the spike in complaints last spring was the company's growth rate - from 200,000 customers in 1997 to 1.3 million in 1999.
"One of the great challenges was handling the needs and requests of such a large number of customers," the company said. "As a result, ETrade has dedicated increased resources to streamlining the ability to handle a variety of issues and factors."