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April Fools Sees Fake Extra Millions For Users of Brokerage Site
Upstart online brokerage site Zecco had an unfortunate April Fool's day snafu that they are claiming was an honest mistake. Users logged on to find larger balances than they should have, sometimes millions of dollars extra, and many of those users started trading with the nonexistent money. Happy April Fool's Day. "... when Zecco realized it, the company apparently started to force sell, even at a loss, charging the losses to the customers along with a '$19.99 broker-assisted trading fee.' Oops."
use strict;
First of all, it obviously WAS an honest mistake. Even if they millions showing up as "buying power" were intended as a joke, the fact that the system allowed them to be used for actual purchases, most certainly was a mistake.
Now, when you have a brokerage account and are trading stocks, you should know what you are doing and be responsible for your actions. So, when you see several million in you account, you should know as much to not start investing them. If it is not your money, at best it will be considered a margin trade which has to abide to SEC mandated rules. IIRC on a margin trade you have to have equity worth 25% (or whatever the figure is) of the security that you acquired on margin. Otherwise the broker has to automatically sell to cover. If you don't know things like that, you should not be trading at the stock market.
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It's from the Roman numeral for thousand: M. MM is a thousand thousand, or a million.
... and that's when the C.H.U.D.'s came at me.
Are you illiterate? From the summary: Upstart online brokerage site Zecco had an unfortunate April Fool's day snafu that they are claiming was an honest mistake (emphasis mine).
From the linked "article": Consumerist has updated their post with a message from Zecco claiming that it was not an April Fool's joke,...
And from the "real" article that is linked from there: Online brokerage site Zecco accidentally increased 1% of their customers' Buying Power balances by millions on April 1st, leading some customers to wonder whether it was a system glitch or some horrible April Fool's joke. It turned out to be the former.
And from Zecco itself: "Additionally, we want to make it clear that contrary to some reports, this was not in any way intentional and was not an April Fool's joke. We take the integrity of our customers' accounts very seriously and we have taken measures to ensure this does not happen again."
Whether or not you believe Zecco is a different matter, but the only thing pointing towards it being an April Fool's joke is speculation, and this is flatly contradicted by the claims of Zecco, and the summary somewhat accurately conveys this.
Yeah, it should be. And, when actually using Roman numerals, it is. But, for some reason MM means million when used like this. Don't ask me why; it didn't make any sense the first time I heard about it.
... and that's when the C.H.U.D.'s came at me.
Except in a very small number of egregious and fraudulent cases, customers will not be responsible for losses (or gains) incurred for trades in excess of their buying power.
Not sure that we can gather much great information from a blog that links to a blog that links to another blog ... why not have the /. link go right to the first article?
"Those who would give up essential liberty for temporary safety deserve neither liberty nor safety" - Benjamin Franklin,
A million in Roman Numerals would be an M with a horizontal bar over it (the horizontal bar means the numeral should be multiplied by a thousand).
However, this character (M-bar) did not exist in most typefaces when finance was being written about & published extensively for the first time (eighteenth century) so manuscripts we printed using a second 'M' instead.
Since people learned notations from the books they read, the 'MM' abbreviation for millions stuck around, being passed into each new generation of printed books & pamphlets... it's still in heavy use in finance and accounting to this day.
Yes, it's a legacy artifact, but I like it because it disambiguates 'M' from meaning million (as an abbreviation for million) or thousand (from Roman numerals).
"Trolls they were, but filled with the evil will of their master: a fell race..." -- J.R.R. Tolkien on Olog-hai
for those keeping track, its:
- slashdot links to
- techdirt links to
- consumerist links to
- mymoneyblog links to
- zecco forums
Intron: the portion of DNA which expresses nothing useful.
There was no change in anyone's balance, 1% of users simply had their credit line extended. And some of those people decided to spend egregiously from this new credit line.
They probably thought they could make a quick buck and pay back the AIG mortgage that they defaulted on. Apparently we have learned nothing from the economic collapse.
People have no obvious way of knowing they're fake. People do what people do - use the money.
And people who have done the same type thing with ATMs find they are fully responsible for their spending habits. If today you have $1,000 in the bank and tomorrow you find $1,000,000 in your account, it is rather obvious you didn't just make $999,000 dollars over night. If you spend it, you just spend dollars out of your original $1,000 and not out of your desired $999,000. If you go in the negative, you're still responsible for the negative balance. At least that's how the courts have treated these cases in regards to ATMs. And guess what, they even had to pay their applicable ATM fees.
Um, perhaps a better analogy would be if the pharmacy gave the patient enough medication for a year, with instructions on how much to take each day, and the user then takes all the pills at once knowing that they are all an april fools joke, and can't possibly be real medicine.
You obviously have no idea how a stock brokerage account works and need to shut up. Buying power can be taken away at any time, that is the risk you run when you buy on margin (which is what they were doing). You sign pages and pages of documents explaining margin when you open a brokerage account. You are buying stuff with the broker's money, on loan. Period. If you go blow it on stocks that go down in value, YOU are responsible for the loss, NOT THE BROKER.
Once you get a real bank account, maybe you will understand.
Yes, that's correct.
If you make a deposit in your account, you cannot cash it until either (1) it clears or (2) a hold is placed on your account in the amount of the check to cover it in case it bounces.
Since your buying power was not affected, this means that you are able to treat the deposited item as cash, investing it in securities. This is only possible if there is a hold on equivalent funds in your account.
What is boils down to is that in order for the funds to be available for you to purchase securities with, a hold has to be placed on covering funds. If Zecco instead had a policy where funds could not be invested until the deposit clears, then you'd be able to withdraw the $10000 without a problem.
Say your buying power is 1x your deposits. Your despoits were 10,000 (100% cleared) and $500 (not cleared). You buy 500 of securities, and withdraw $10000. Then the check bounces. Now you have $0 deposits to cover $500 of securities. Uh-oh... FTC securities violation.
Because of the fact that Zecco needs to make funds available for investment immediately (I dunno if this is statutory, or if it's to compete in the marketplace), they have to place the hold on your $500.
"Trolls they were, but filled with the evil will of their master: a fell race..." -- J.R.R. Tolkien on Olog-hai
The others use 'encrypted' pdfs, which require at least Acrobat 5 or something, however they don't ask for any sort of decryption key, so I am confused as to how the encryption actually works.
A quick primer on pdf encyryption:
*pdfs can be encrypted with a variety of encryption algorithms, the algorithms range from resaonable to very strong.
*to decrypt the pdf one of two passwords is needed the "owner password" and the "user password", the user password is often blank allowing viewers to load the document without prompting for a password.
*if the "user password" is used to decrypt then the viewer is supposed to apply a set of restrictions set by the author. However there are tools out that that ignore this rule and let you do what you like with such a pdf.
What you have sounds like a pdf with an owner password but a blank user password (like many pdfs you find on the web). Basically a pdf with restrictions on how it can be used (that only some software will enforce) but no security against anyone who has the file reading it.
note: i'm known as plugwash most places but i screwd up registering that here somehow in the past and now can't register
On the other hand, if you think you have somewhere between $3400 and $3800 in the bank and you're not quite sure, and then your ATM says, no, you have $3964.01 in there, it may not be apparent that there's been a glitch giving you an extra $500. Or were all cases so ridiculously out of balance that it should have been clear to everyone their money couldn't possibly be right?
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