Online brokerage firm Datek is having a numbers problem.
In the past few weeks, the company's day trading Web site has occasionally displayed inaccurate stock prices and incorrect closing prices and encountered glitches with its streaming ticker services.
Datek pointed the finger at its data providers.
"Our quotes come directly from the exchanges themselves," said Datek spokesman Brian Dorf. "I have seen times when there are delays in quotes, but generally that's not a problem with our page."
The company could not explain why other online brokerage firms hadn't experienced similar problems.
Datek customer Austin Franklin claimed he lost money when Datek stopped updating his online portfolio after a stock he owned was moved from Nasdaq to another exchange. The stock dropped in value, but Franklin said his account did not reflect the correct valuation.
"If they're holding a stock for me, they have an obligation to tell me that it's gone down in value," Franklin said. "I lost US$1,700 because of their misrepresentation of the value of the stock."
He said he had contacted Datek about the problem but that he was prepared to seek legal remedies if he and the company cannot resolve the issue.
Franklin, who lives in Massachusetts, said state law allows consumers to sue in small claims court if their problems are not remedied 30 days after the customer has explained a grievance to a company in writing. So-called "long arm statutes" extend the jurisdiction of the court beyond the state's border.
"The state of Massachusetts can prohibit [Datek] from doing any business in Massachusetts until the case is resolved," Franklin said.
And judging by the number of frustrated customers who have posted complaints on newsgroups, the problems on Datek's site have been many.
"Some of the numbers are funny sometimes," said Bruce Momjian, a programmer who is new to the investment world. "Today it shows HP's closing at 93. It's never been that high."
Momjian said stock price misquotes on Datek were rare and that problems he's encountered are generally related to closing prices. Overall, Datek provides excellent service, according to Momjian. He said some of his friends do trading online with Etrade, but use Datek's Streamer to keep abreast of changing prices.
"The reason I chose Datek is because they seem to be the best and I still believe that's true," he said. "As a programmer, I guess I'm a little more forgiving."
"For weeks Datek was displaying bad quotes for Dow & Nasdaq," one user complained on misc.invest.stocks. "Makes you wonder if you can trust what you see onscreen."
Datek's terms and conditions page clearly states that the company does not guarantee the accuracy of information on its page: "You agree that your use of the Web site or any Datek Online service is at your sole risk."
But the disclaimer may not shield Datek from liability, said Blake Bell, a securities attorney with Simpson, Thacher & Bartlett.
For example, securities law requires that e-brokers have adequate systems in place to handle user volume. But consumers may have a range of legal remedies to pursue, depending on their relationship to the company, Bell said.
Customers like Franklin probably have a higher degree of protection because of the fiduciary duty owed to them, Bell said. Actual Datek clients would have more access to regulatory, statutory, and common law protections than, say, users who rely on the company's streaming stock ticker.
With its reputation at stake, Datek might be wise to offer customers more protection than the law allows, Bell said.
"I would imagine that, more likely than not, they would bend over backward to address a customer's concerns -- not for any reason related to the law but just good old, common sense customer relations."
