Kevin O'Hanlon, Associated Press Writer, 10 August 2005
LINCOLN, Neb. -- Online broker Ameritrade is being accused of costing investors $100 million by delaying orders to buy and sell stock.
A class-action lawsuit filed in U.S. District Court alleges that Omaha-based Ameritrade Holding Corp. in one instance took more than an hour to execute a trade, costing an investor more than $26,000.
"Some of the trades ... were delayed hours," said attorney Max Folkenflik, who filed the lawsuit for Telco Group, Inc., a telecommunications company based in Flushing, N.Y., on behalf of all Ameritrade customers since April 2000.
Ameritrade spokeswoman Kim Hillyer declined comment on the lawsuit.
Folkenflik said Ameritrade advertised that the median time to execute all trades from August 2003 to January 2004 was less than three seconds.
In one example listed in the lawsuit, Telco placed an order to buy 175,000 shares on the Nasdaq Stock Market on Jan. 7, 2004. The high price when the trade order was received was $37.54 per share, while the low price was $37.53.
The transaction was received at approximately 3:05 p.m. but was not executed until 4:20 p.m., when the shares were trading at $37.68 per share, according to the lawsuit.
"As a result of Ameritrade's failure to process the trade promptly and at the best possible price under the circumstances ... Telco lost $26,250," according to the lawsuit.
Another class-action lawsuit against Ameritrade is pending.
That lawsuit was filed by David Zannini of Angier, N.C., and three other Ameritrade customers who said the glitches in Ameritrade's online system were caused by "antiquated and inadequate systems and an insufficient number of employees" to help customers make trades.
The lawsuit claims Ameritrade spent its money on recruiting new subscribers rather than fixing the problems.
That action is pending in Douglas County District Court.
The dismissal of another class-action lawsuit against Ameritrade is on appeal to the Nebraska Court of Appeals.
That lawsuit was filed by Mitchell Green of Los Angeles, who agreed in 1998 to pay $20 a month for an Ameritrade service to get real-time information on stocks and options.
His lawsuit, however, alleged that the information on the options -- agreements to buy or sell a stock at a certain time or price -- was "stale."
Douglas County District Judge Gary Randall recently ruled that Ameritrade's promise to make "real time" trades did not amount to a contract with its customers.
Founded by Joe Ricketts of Omaha, Ameritrade rapidly expanded in 1997 when it began offering rates as low as $8 a trade.
Ameritrade recently signed a deal to acquire rival TD Waterhouse USA from TD Bank Financial Group for about $3 billion. The deal would make Ameritrade the largest online broker -- at an estimated 239,000 average daily client trades.
Last year, Ameritrade had net income of $272.3 million, or 64 cents a share on $880.1 million in revenue.
Shares in the company rose 9 cents to $20.06 in afternoon trading on the Nasdaq Stock Market.
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LINCOLN, Neb. -- Online broker Ameritrade is being accused of costing investors $100 million by delaying orders to buy and sell stock.
A class-action lawsuit filed in U.S. District Court alleges that Omaha-based Ameritrade Holding Corp. in one instance took more than an hour to execute a trade, costing an investor more than $26,000.
"Some of the trades ... were delayed hours," said attorney Max Folkenflik, who filed the lawsuit for Telco Group, Inc., a telecommunications company based in Flushing, N.Y., on behalf of all Ameritrade customers since April 2000.
Ameritrade spokeswoman Kim Hillyer declined comment on the lawsuit.
Folkenflik said Ameritrade advertised that the median time to execute all trades from August 2003 to January 2004 was less than three seconds.
In one example listed in the lawsuit, Telco placed an order to buy 175,000 shares on the Nasdaq Stock Market on Jan. 7, 2004. The high price when the trade order was received was $37.54 per share, while the low price was $37.53.
The transaction was received at approximately 3:05 p.m. but was not executed until 4:20 p.m., when the shares were trading at $37.68 per share, according to the lawsuit.
"As a result of Ameritrade's failure to process the trade promptly and at the best possible price under the circumstances ... Telco lost $26,250," according to the lawsuit.
Another class-action lawsuit against Ameritrade is pending.
That lawsuit was filed by David Zannini of Angier, N.C., and three other Ameritrade customers who said the glitches in Ameritrade's online system were caused by "antiquated and inadequate systems and an insufficient number of employees" to help customers make trades.
The lawsuit claims Ameritrade spent its money on recruiting new subscribers rather than fixing the problems.
That action is pending in Douglas County District Court.
The dismissal of another class-action lawsuit against Ameritrade is on appeal to the Nebraska Court of Appeals.
That lawsuit was filed by Mitchell Green of Los Angeles, who agreed in 1998 to pay $20 a month for an Ameritrade service to get real-time information on stocks and options.
His lawsuit, however, alleged that the information on the options -- agreements to buy or sell a stock at a certain time or price -- was "stale."
Douglas County District Judge Gary Randall recently ruled that Ameritrade's promise to make "real time" trades did not amount to a contract with its customers.
Founded by Joe Ricketts of Omaha, Ameritrade rapidly expanded in 1997 when it began offering rates as low as $8 a trade.
Ameritrade recently signed a deal to acquire rival TD Waterhouse USA from TD Bank Financial Group for about $3 billion. The deal would make Ameritrade the largest online broker -- at an estimated 239,000 average daily client trades.
Last year, Ameritrade had net income of $272.3 million, or 64 cents a share on $880.1 million in revenue.
Shares in the company rose 9 cents to $20.06 in afternoon trading on the Nasdaq Stock Market.
