How long do you have to wait for a complaint to get resolved at E*Trade? For one investor, it took 40 days, and according to his attorney, the problem is exacerbated by phone reps’ lack of experience.
Quote of the Week “Order-takers have been there as little as six months. Managers have been in the business two years. Gee, I wonder why orders aren’t being handled properly?” Phil Aidikoff, securities attorney who has represented investors against online brokers.
Customer dissatisfaction reared its ugly head again for E*Trade. An NASD arbitration panel in San Francisco ordered the firm to pay $61,203 in compensatory damages to a customer whose trade was botched last year. Aside from the bungled handling of a trade cancellation that triggered a margin call, and calls from a collection agency that eventually ruined the customer’s credit, the more disturbing aspect is this: With market risk on the line, E*Trade took five days to initiate a trade inquiry, and 40 days to conduct its investigation and never did reach the right conclusion. Meanwhile the customer was wiped out, losing $53,000.
On Feb. 4, 1999, Ali Lee Khadivi claimed that he placed a limit order to buy 1,000 shares of Perot Systems Corp. Then, approximately a half-hour later, he cancelled it, before the price hit the target of 71. But an hour and a half later, he received a confirmation that E*Trade executed the limit order, ignoring the cancellation. Khadivi complained. And, without looking at the timeline on the transactions, someone at E*Trade concluded that, because Mr. Khadivi had sold 1,000 shares of the same stock earlier in the day, his limit order must have gone through. The case wound up in arbitration.
Beverly Hills attorney Phil Aidikoff, who represented Khadivi, tells horsesmouth that the inexperience of E*Trade’s employees may have cost his client. He’s seeing other cases at online firms where transactions, margin calls, and subsequent trade inquiries are not handled properly.
“Online firms have a lot of employees who are new to the business, and have never experienced a test under fire,” Aidikoff says. “When I go to hearings on Internet trading cases, it always surprises me to see the age of the people on the other side. They’re all smart, but they just don’t have the
experience. When there’s a problem they don’t always react appropriately. …It will get resolved overtime, but right now it’s frightening.”
Aidikoff speculates that at a traditional brokerage firm, a trade inquiry would have been initiated immediately to avoid further market risk and quite likely resolved within 24 hours. The price of Perot Systems fell more than 30 points before the trade inquiry was concluded, and is now trading at around $11 a share.
The arbitration panel gave Aidikoff and his client everything they requested, except attorney’s fees.
In a statement to The Wall Street Journal, an E*Trade spokesperson said the firm disagreed with the award but would abide by the judgment.