Commentary

Anne Plested
Traders Magazine Online News

Bottlenecks Ahead

Anne Plested, head of Fidessa's EU Regulation Change programme, has written a short blog arguing that although we should be thankful that ESMA have taken a pragmatic approach to moving things along, more bottlenecks could appear in the future.

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May 31, 1999

Datek Online Holdings FinedFor Misuing Clients Funds

By Staff Reports

Datek Online Holdings, operator of Island, the high-flying electronic communications network, has been slapped with sanctions by the Securities and Exchange Commission.

The SEC imposed the sanctions on Datek Online for erroneous financial statements and for misusing customer funds. Datek allegedly moved as much as $50 million a day from some customer accounts to settle other customer trades and to pay the firm's expenses.

For its part, the firm said there was no intention to defraud customers, adding that the errors were an innocent mistake.

No customer money was lost but the misleading financial statements did put customer money at risk, according to the SEC. Datek, which is based in Iselin, N.J., was fined $50,000 and censured. Datek's chief financial officer, Moishe Zelcer, was fined $10,000 and received a 90 day suspension.

The SEC required Datek to recruit an outside consultant to examine its backoffice procedures.

Datek, which is planning to transform itself into a stock exchange, has been in trouble before. About a year ago, it cancelled an initial public offering while charges were leveled that it participated in a money laundering scam. Earlier in its life, Datek was a target of criticism by some market makers. They claimed it was abusing the SOES system. Day traders were lured to Datek by its speedy executions and strong technology.

In recent months, Datek has burnished its reputation, hiring pros and top executives from established securities firms.