Investor Brain

Friday, September 14, 2007

TD Ameritrade's Statement Regarding Database Breach

The following is a press release issued by TD Ameritrade this morning:

TD AMERITRADE RELEASES RESULTS OF CLIENT SPAM INVESTIGATION

Assets Remain Secure
No Evidence of Identity Theft

Omaha, Neb., September 14, 2007 – TD AMERITRADE Holding Corporation (NASDAQ: AMTD) has discovered and eliminated unauthorized code from its systems that allowed access to an internal database. The discovery was made as the result of an internal investigation of stock-related SPAM.

The Company commissioned forensic data experts to assist in its investigation of this issue. Results of their combined efforts reveal the following:

—Client assets held in accounts with the Company remain secure as UserIDs, personal identification numbers and passwords were not stored in this particular database.
—Information such as email addresses, names, addresses and phone numbers was retrieved from this database and affects TD AMERITRADE retail and institutional clients.

While more sensitive information like account numbers, date of birth and Social Security Numbers is stored in this database, there is no evidence that it was taken. 

“While the financial assets our clients hold with us were never touched, and there is no evidence that our clients’ Social Security Numbers were taken, we understand that this issue has increased unwanted SPAM, which is annoying and inconvenient for them,” said Joe Moglia, chief executive officer.  “We sincerely apologize for that and any added concern this may have caused.”

The Company has hired a third party, ID Analytics, Inc., to investigate and monitor for potential identity theft.  ID Analytics provides identity risk services to many of the country’s largest banks and telecommunications companies, as well as government agencies. Following its initial evaluation, ID Analytics found no evidence of identity theft as a result of this issue. 

“Following our thorough analysis, we found no evidence of identity theft related to TD AMERITRADE clients as a result of this issue,” said Mike Cook, chief operating officer of ID Analytics, Inc. “In our opinion, TD AMERITRADE is applying proven measures and technologies to help protect its clients from identity theft.”

TD AMERITRADE will retain ID Analytics’ services on an ongoing basis to support its client accounts by continuing to monitor for evidence of identity theft.

The Company is confident that it has identified the way in which this information was taken and has taken the appropriate steps to prevent it from recurring. 

“This issue is not unique to TD AMERITRADE.  It’s something that all companies involved in e-commerce should be aware of and prepared to address,” Moglia continued. “We participate in industry peer groups to share information on these types of threats in the interest of protecting all clients.”

TD AMERITRADE wants its clients to know that no special actions are required of them with regard to their accounts, other than to continue remaining alert in guarding their personal information. Their account assets are still protected by the Company’s Asset Protection Guarantee.

For more information on this issue and the Asset Protection Guarantee, please visit the Company’s special client information center at http://www.amtd.com.

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Please post a comment if you have any experience with this issue.  Thanks. 

Wednesday, August 22, 2007

No, No, A Thousand Times No

The rumor mill is abuzz, once again, with the possibility of E*Trade merging with TD Ameritrade.  I have one plea, based on the needs of online investors and traders:  Please Don’t Do It. 

Yes, TD Ameritrade has some noisy hedge funds trying to force them into a merger.  It would be a disaster from a customer point of view – which is the point of view of my “Electronic Investor” column.  Both firms have huge customer bases, as they are currently #2 and #3 in terms of number of accounts.  (Schwab is #1.)

They serve very different needs, though, and I believe a merger, though it might make certain hedge fund managers happy, would make millions of customers miserable. 

And one columnist. 

Friday, August 17, 2007

Schwab Melts Down on Day NASDAQ Peaks

Bad time for a case of “human error,” Schwabbies. 

Yesterday (August 16), the NASDAQ announced that it had the biggest day ever in its history for total matched volume, with approximately 3.73 billion shares traded.  But around 9:45AM Pacific time, Schwab’s (http://www.schwab.com) online trading site, along with its phone lines, shut down due to what they said was “a human error that restricted trading capacity,” according to an Associated Press report. 

Other brokers I contacted yesterday, including thinkorswim, optionsXpress, ChoiceTrade, TradeStation, and E*Trade reported that they were experiencing no trading-surge-related problems. 

Having covered online brokers since 1992, I’ve seen plenty of meltdowns.  Most of them happened during the mid- to late-90s, when online brokers were setting up shop and trying to simultaneously cope with the surge of interest in trading.  Capacity planning was a huge issue, and one that I query every year when I put together my online broker surveys for Barron’s. I once likened Schwab’s ongoing efforts to spiff up their platform and avoid the constant crashes as trying to change a tire on a car that was barreling down the freeway at 100mph. 

The one and only time Schwab answered the my question, “What percentage of your accounts can be online simultaneously?” they said 15%.  I made a fairly big deal about it at the time, so they have since refused to answer question with anything specific.  This year, their answer was, “We are committed to ensuring the stability and security of our systems. Our capacity is at a level which can handle many times the maximum historical demand.”

To be fair, there are several other brokers who dance around this question, including Fidelity who says, “We do not track capacity in this way,” and E*Trade, which states, “Not publicly disclosed; E*TRADE employs open ended architecture with scalable capacity.” TD Ameritrade flat-out did not answer the question at all, even with evasive dancing. 

Most other brokers reported capacity between 95% and 250%.