(March 1) – “Online-brokerage firms advertised heavily in the bull market, drawing in thousands of new customers, but some investors hollered when the firms’ systems cracked under the trading overload. Now, securities regulators have begun to do something about it,” writes Ruth Simon in today’s Wall Street Journal.

“In its first online-trading case, the New York Stock Exchange censured and fined TD Waterhouse Investor Services Inc., the nation’s fourth-largest online broker, $225,000 for problems associated with repeated outages that left many customers unable to trade.”

“The action, by a NYSE hearing panel, is part of a broader crackdown on online brokers. Big Board examiners are scrutinizing the operational problems of online firms and already have referred other matters involving online brokers to the Big Board’s enforcement division, NYSE officials say. More enforcement actions are likely, they said.”

“The regulatory arm of the National Association of Securities Dealers, which oversees the Nasdaq Stock Market, also is taking a close look at the issue.”

“TD Waterhouse Investor Services, the U.S. brokerage unit of TD Waterhouse Group Inc., was unable to process online orders ‘for various time periods on 33 trade dates’ during an 18-month period, the hearing panel found. Customers who then tried to place telephone orders faced waits of as much as 60 minutes, the NYSE says.”

“Waterhouse consented to the Big Board order without admitting or denying guilt. ‘We are pleased to have settled this matter amicably with the exchange,’ says Waterhouse spokeswoman Melissa Gitter. ‘We are proud of the high-quality service our customers experience today,’ she says. ‘We regret that customers may have been inconvenienced.'”