TD Ameritrade is an
online broker with over 6 million U.S.
customers, and many more internationally, that has grown rapidly
through acquisition, to become the 746th-largest US firm in 2008.
TD AMERITRADE Holding Corporation ( ) is the owner of
TD
AMERITRADE Inc.. Services offered include common and preferred
stocks,
ETFs,
option
trades,
mutual funds,
fixed income,
margin lending, and cash management
services.
Ameritrade Apex
The preferred customers of Ameritrade, Apex clients make either
fifteen trades per quarter or have an account balance of one
hundred thousand dollars to qualify. Ameritrade Apex clients also
receive level-two quote-scope software. With level two they can see
all stock orders placed by market makers in real time.
History
TD AMERITRADE traces back its lineage to a small investment banking
firm and
First Omaha
Securities, Inc. (later Accutrade) in Omaha, Nebraska
. Ameritrade Clearing Inc. was established as
a
clearing broker in
1983, and by 1987 TransTerra Company became the holding company for
Ameritrade, and the company was subsequently known as TransTerra
Company. In 1988, the company introduced the first quote and order
entry system via the touch-tone phone. In 1995, the company
acquired K. Aufhauser & Company, Inc. and its WealthWeb, the
first firm to offer online securities trading, receiving the first
order in August 1994. In October 1995, Ameritrade acquired All
American Brokers. In January 1996, TransTerra's Accutrade launched
"Accutrade for Windows," the first
online investing system that let
individuals partake in program investing and basket trading. By May
1996, TransTerra launched an Internet only broker called eBroker,
and by November, TransTerra Company became Ameritrade Holding
Corporation.
In March 1997, Ameritrade became a publicly held company, and its
IPO opened at $15 per share. Ameritrade formed Freetrade in
November 2000, which provided commission-free equity market orders.
Freetrade was later replaced by Ameritrade Izone, which offered $5
equity market orders, though it no longer exists. In 2001,
Ameritrade made two acquisitions: the February acquisition of
TradeCast, giving Ameritrade a presence in the business-to-business
arena, and the September acquisition of National Discount Brokers
Corporation, adding $6.3 billion in client assets.
In 2002, Ameritrade merged with Datek Online Holdings Corporation,
and changed commissions to $10.99 from $8 for market orders and $12
for limit and stop orders. Ameritrade purchased
Mydiscountbroker.com in June 2003, and client accounts reached 3
million. In 2004, Ameritrade completed the purchase of Bidwell and
Company in January, BrokerageAmerica in February, Investex in May
and JB Oxford and Company in October. As of August 2007, there were
reports suggesting that Ameritrade was engaged in merger talks with
E*TRADE.
In 2008, long-time CEO
Joe Moglia
announced he would be vacating the CEO position in the upcoming
fall after seven years to pursue other interests. Fred Tomczyk, the
former COO, was named his successor and took over in September
2008. Rumors started that the company was going to move its
headquarters out of the Omaha area after Moglia took over the
Chairman position from founder and former CEO
J. Joseph
Ricketts. With the departure of Ricketts, who founded the
company in Omaha, the company for the first time in its history had
no members from the founding family on its management team, outside
of the two that remained on the Board of Directors. Tomczyk further
strengthened the rumors when he stated that he would not be moving
out to Omaha, but rather staying in the New York City area, where
he is based out of. However, those rumors were put to rest when in
October 2008 plans were unveiled of the new TD Ameritrade
headquarters in Omaha. The new headquarters would consolidate the
call center and corporate offices together into one building. The
new building, planned for development in the Old Mill area of
Omaha, has a scheduled completion date of 2012. Tomcyzk later
confirmed that the company considered moving out of the Omaha area,
but decided to stay because of the large number of employees based
in Omaha.
Tomczyk
announced on June 10, 2009, that the name of
the new
ballpark
will be TD Ameritrade Park Omaha. He had
also made a statement that morning that this move is a sign that
the company will continue to be headquarted in Omaha. TD Ameritrade
will be paying an average of $1 million a year for the naming
rights. The
NCAA has also mentioned that they
are interested in talking with the company about a corporate
sponsorship.
Acquisition of thinkorswim Group Inc.
On January 7, 2009 TD AMERITRADE acquired
thinkorswim Group Inc. (NASDAQ:SWIM) in a cash
and stock deal valued at approximately $606 million. The
transaction aimed to advance TD AMERITRADE's growth strategy on the
trading side of the business.
Acquisition of TD Waterhouse USA
On January 24, 2006, Ameritrade Holding Corporation acquired
TD Waterhouse USA from
TD Bank Financial Group. Following the
acquisition, it renamed itself TD AMERITRADE. TD AMERITRADE is one
of the largest online brokerages, with 6.3 million client accounts
and $300 billion in client assets. Revenue and net income are
expected to increase to $1.8 billion and $557 million,
respectively. TD Bank now owns 39% of TD AMERITRADE, and purchased
Ameritrade's Canadian brokerage operations for $60 million cash. As
part of the acquisition, Ameritrade investors received a special
one-time $6 dividend, funded from Ameritrade borrowings and excess
cash contributed to TD Waterhouse USA by TD Bank. TD Bank will
limit their ownership of TD AMERITRADE to 45% for up to ten years
after the acquisition, while founder
J. Joseph
Ricketts will limit his family's ownership of TD AMERITRADE to
29% for ten years after the acquisition. Ameritrade CEO
Joe Moglia became the CEO of TD AMERITRADE.
Controversies and scandals
Security breach and resulting Identity theft risk and Class
action lawsuit
In October 2005, several
nanae posters began
to uncover what was at the time the 3rd largest dataloss incident
ever when they reported spam to the disposable email addresses
they'd given (only) to Ameritrade that were not the result of a
Directory Harvest Attack
and TD AMERITRADE staff reported that it was investigating the
matter.
Reports of an ongoing problem continued. For example, on March 30
2007, a
Slashdot article reported that
unique email addresses provided only to TD AMERITRADE were
frequently becomingtargets for spammers. There was speculation that
one of TD AMERITRADE's affiliated companies was the source of the
leaks.
However, in mid-September 2007 media including the
Associated Press and British tabloid
IT-news portal
The Register reported
that TD Ameritrade had disclosed that TD Ameritrade had itself
fallen victim to a backdoor-based network attack, and that a
database containing all customer
Social Security numbers,
names,
addresses, and
email addresses had been compromised. The
Register alleges said breach was only disclosed after a class
action lawsuit started against the TD Group. TD Ameritrade has
stated that the stolen information included account information
such as
account balances.
Preliminary approval a proposed class action settlement agreement
was requested of Judge
Vaughn R.
Walker, who denied the request on
June 30, 2008.
On November 13, 2008, the state of Texas
, in a letter from attorney
general of Texas
to Judge
Walker objected to a revised settlement agreement.
In October 2009, Judge
Vaughn R.
Walker denied final approval to a
settlement proposal he had preliminarily approved, on the grounds
that the proposed settlement seeks to confer no discernible benefit
upon the class, the plaintiffs had mischaracterized the nature of
the risks associated with the breach, and hence the settlement was
not fair, reasonable and adequate. The court also decertified
Kamber Edelson LLC,
Parisi & Havens LLP, Scott A Kamber
and Ethan Mark Preston (“Kamber et al”) as lead counsel.
Investigation of the breach is reported to be ongoing, but no leads
have been reported.
TD Ameritrade and the Auction Rate Securities Scandal
On Monday, July 20, 2009, TD Ameritrade agreed to pay $456 million
to settle a lawsuit involving the marketing of a debt class that
ended up crippling investors. As part of the settlement, TD
Ameritrade is set to repurchase all auction-rate securities sold
prior to February 13, 2008 from retail investors with accounts of
$250,000 or less within the next 75 days.
TD Ameritrade's lawsuit spawned from its involvement in the
auction rate security scandal.
Ameritrade sales people actively promoted
Nuveen's
auction
rate securities as an alternative to
money funds, resulting in individuals inability
to liquidate out of their securities.
An
auction rate security is a
type of
closed-end fund which means
the fund has a fixed initial investment and is then traded on a
secondary market. The money was to
be invested in municipal securities and other instruments at rates
that would be determined by weekly auctions. TD Ameritrade
salespeople promoted
Nuveen funds with names
like "Quality Preferred Income II" to corporate and individual
investors, claiming they were liquid alternatives to money market
funds.[3] In fact they were not, because they had no expiration
date and the issuer has no obligation to pay back money it has
borrowed from the investor, who can only cash out by selling his
investment to someone else.
The market for auction rate securities collapsed in February, 2008
when broker-dealers such as UBS declined to continue to participate
in
dutch auctions that determined the
rate of interest for the securities. Up to this point, brokers and
issuers had propped up the auctions by acting as a bidder of last
resort; without their participation, the market quickly folded.
Investors were left with "frozen" accounts, that essentially were
worth nothing, since they could not be redeemed and the investment
houses that created them refused to close them out or return the
money.
Investor groups are said to be organizing class action suits
against Ameritrade,
Nuveen, and other
organizations such as UBS and
Merril
Lynch, that have been involved in the
auction rate security scandal.
TD Ameritrade and the Reserve money funds
The firm's customers were approached by TD AMERITRADE brokers and
recommended to invest their liquid money in a
money fund managed by
The Reserve, RYPQX (the
Reserve Yield Plus Class R fund), according to investors in the
fund. More than 98% of the fund had been sold to TD AMERITRADE's
clients, as disclosed in a statement from the Reserve in July 29,
2008. When the fund
broke the buck
along with several other Reserve
money
funds in September, 2008, money assets of thousands of TD
AMERITRADE clients (including many senior citizens) were frozen.
For the larger
Reserve Primary
Fund that also broke the buck, TD AMERITRADE said it will
reimburse clients for up to a 3% loss. Other Reserve funds, such as
the Interstate Tax Exempt Fund, were sold by TD Ameritrade, and
were caught up in the Primary Fund's Failure, leaving investors in
these funds without liquidity. However, the Reserve Yield Plus fund
previously marketed by the company is not covered by the
offer.
Investors allege a
conflict of
interest for TD AMERITRADE to promote the fund over its clients
in the presence of a distribution agreement between The Reserve and
TD Ameritrade that earns Ameritrade an undisclosed slice of fee
revenue.
Fred Tomczyk (TD AMERITRADE
president) argued that the contract was a standard one and that "an
investment firm has to make money in some way." According to the
Chicago Tribune article, the
distribution agreement clearly was effective: assets in Yield Plus
Class R shares sold almost exclusively to TD Ameritrade clients
shot from almost nothing in 2006 to $770 million by March of this
year, public documents show. Another class dominated by the Omaha
firm shot from $2 million to $171 million.
The
SEC
along with several state regulatory agencies are investigating TD
Ameritrade's fund promotion and marketing practices. The company is
named in a
class action lawsuit for
misrepresentation and marketing of
the Reserve Yield Plus fund as a money market fund. The Sacramento
Bee reported that the SEC filed a civil complaint against Reserve
Management, chairman Bruce Bent Sr., and vice chairman and
president Bruce Bent II in May 2009. It also reported anticipated
investor losses of 8.3%, and TD Ameritrade spokeswoman Kim Hillyer
said it will cover up to $50 million of losses in the Primary
Fund.
As of November 16, 2009, about $85.5 million Yield Plus Fund assets
are still being held by the Reserve Management Co., who decided to
hold off on distributions to shareholders in order to "set aside
money to cover potential claims" against itself.
Competitors
See also
References
External links