(February 8 – 18:10 ET) — NASD Regulation Inc. has reached a settlement with Datek Online Brokerage Services LLC, resulting in a censure and US$30,000 fine for incorrect disclosure in approximately 1 million customer confirmations and related supervisory failures.

NASDR found that in March 1999 Datek changed its execution process for certain trades. However, Datek failed to change its computer coding process for confirmation disclosure so that the execution capacity was accurately disclosed.

Securities law in the United States requires brokerage firms to disclose in customer trade confirmations whether the firm is acting as the customer’s agent, or as a principal for its own account.

NASDR also found that Datek became aware of the inaccurate disclosure being made on its customer confirmations in November 1999, and instructed the appropriate departments to fix the problem.

However, the firm failed to follow up to ensure that the instructions were carried out. The computer coding was not changed and as a result the firm inaccurately disclosed its capacity as agent in approximately 1 million trades from March 1999 through March 2000.

Without admitting or denying NASDR’s findings, Datek settled the action.
-IE Staff