E-Trade Fined $20,000 by NASD for Slow Reply
Apparently, customers aren't the only people having trouble getting through to online brokerages.
In the first such penalty against a major electronic brokerage, the National Assn. of Securities Dealers said Tuesday that it fined E-Trade Group $20,000 for being slow in responding to requests for information about customer complaints.
From April to June 1999, the NASD said it asked the No. 2 e-broker for information about 17 individual-investor grievances that had been filed with the securities industry's self-regulatory group.
E-Trade eventually furnished the data, but not fast enough for the NASD, though the regulator did not disclose how long it had to wait for the information.
E-Trade agreed to pay the fine without admitting or denying wrongdoing, though it called the response delay "unfortunate."
"It's important that when customers complain to us or to the firms that we receive the information we need promptly," said Barry Goldsmith, executive vice president of enforcement at the NASD's regulatory arm in Washington.
Paced by heavy advertising and the lengthy bull market, e-brokers have enjoyed huge gains in both new customers and trading volume in recent years. E-Trade, for example, saw new accounts jump 169% in the first quarter over last year.
But surveys show that many customers are unhappy with e-broker service and the way grievances are handled. Indeed, complaints about losses due to Web site outages and jammed phone lines have intensified in the past year.
Surveys by J.D. Power & Associates show that one in 10 online investors has lodged a "serious" complaint against an online broker. A January survey found that in 85% of cases, investors were dissatisfied with how firms resolved the issues.
Though that was better than the 90% in an August 1999 survey, "you still have to say it's a real negative for the industry," said Nancy Salk, J.D. Power's director of financial-services research.
"It's an insult to online investors that [firms] have marketed and promoted their services as much as they have, [but] not created the infrastructure and the systems and staffed customer service properly to serve investors," said Jaime Punishill, an analyst at Forrester Research in Cambridge, Mass.
E-Trade ranks below the industry average in overall customer satisfaction, according to J.D. Power.
