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E*TRADE Financial Corporation Message Board

  • DRIPMAN DRIPMAN Jul 9, 1998 6:48 PM Flag


    Iselin, New Jersey, July 9 (Bloomberg) -- Datek
    Online Holdings Corp., the fourth-largest Internet
    brokerage, postponed plans for an initial public offering
    amid reports of government investigations, said a
    person familiar with the situation.

    Datek said
    it ``does not comment on its capital-raising or
    financing activities or press reports of investigations.''
    It said it has been ``busy implementing'' a plan to
    improve management controls since late 1997.

    New York Times reported yesterday that the Securities
    and Exchange Commission is investigating whether
    Datek encouraged illegal practices in a trading unit it
    sold in March. Today, the Wall Street Journal reported
    that CIBC Oppenheimer Corp. and Piper Jaffray were to
    have co-managed the offering.

    CIBC Oppenheimer
    said that its involvement with Datek's proposed IPO
    was very preliminary.

    We didn't go through
    the committees here to the point where we felt that
    we had accepted that role,'' said Tom Ortwein,
    managing director of equity capital markets at CIBC
    Oppenheimer. ``We made no commitment.''

    Officials at
    Piper Jaffray couldn't be reached for comment.

    The trading unit, which had more than 200 day traders
    on its desks, developed a reputation as a Wall
    Street renegade by using computers to exploit a rule
    designed to give small investors direct access to prices.
    The rule requires market makers on the electronic
    Nasdaq Stock Market in many cases to make good on up to
    1,000 shares even if a move in the price makes the
    trade unprofitable for them.

    Traders who take
    advantage of the rule are called ``SOES bandits,'' after
    the Nasdaq's small-order execution system. Datek
    agreed to sell the day trading business to Heartland
    Securities Corp., a money management firm, in March, to
    focus on its brokerage business.


    The government also is looking into whether Datek
    offered customers guaranteed stock returns, a practice
    that could run afoul of SEC anti-fraud provisions, the
    New York Times said yesterday in its ``Market Place''
    column, citing people who said they were interviewed by
    the SEC.

    The ``SEC can neither confirm nor
    deny investigations,'' said John Heine, deputy
    director of the SEC's office of public affairs.

    The office of Manhattan District Attorney Robert M.
    Morgenthau said in May it was investigating whether Datek
    had participated in a money-laundering operation, the
    Times said.

    A spokesperson said the DA's office
    couldn't confirm or deny an investigation into Datek.

    Datek, like competitors such as E*Trade Group Inc. and
    Charles Schwab Corp., lets customers buy and sell stock
    through its World Wide Web site.

    The firm ranked
    fourth among online brokerages at the end of last year
    in terms of average daily transactions, behind
    Charles Schwab Corp., E*Trade Group Inc., and Waterhouse
    Securities, according to Piper Jaffray.


    Datek hired several new officers as part
    of its plan to improve management controls.

    It hired John Grifonetti, a veteran of Deloitte &
    Touche LLP, as its chief financial officer; Jerry
    Duhovic, the former chief operating officer of Titan Value
    Equities Group Inc., an Irvine, California-based
    brokerage, as its chief operating officer; and Ralph
    Sorrentino as its director of clearing operations.

    Datek also hired Deloitte as its accounting firm, and
    Highland Group, an executive search firm, to find a
    president for its online brokerage.

    The IPO
    postponement comes during a weak IPO market. On Monday, Time
    Warner Inc., the world's largest entertainment company,
    delayed a $175 million initial stock sale of shares in
    its local telephone business, blaming the cool
    reception investors have given recent stock debuts.

    18:14:17 07/09/1998

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    • Unless you got in at say 17, how the hell are you
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      Nice pullback too.

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