Datek Founder Citron Leaves to Start Technology Firm (Update1)
Edison, New Jersey, Oct. 6 (Bloomberg) -- Datek Online
Holdings Corp.'s 29-year-old founder and top executive left the
firm, distancing the Internet brokerage and stock-trading network
from a controversial past as it considers when to go public.
Jeffrey Citron was succeeded as chairman and chief executive
by Edward J. Nicoll, 46, who had been president and chief
operating officer. Nicoll joined Edison, New Jersey-based Datek
eight months ago as head of its brokerage business.
Citron, who began day-trading stocks as a teenager, owns
just under one-third of Datek. He gained control of the firm in
1997 after merging it with a software company he co-owned. That
year he, two associates and Datek were cited for violating
National Association of Securities Dealers rules. All were fined
and suspended for a period.
''It's no secret we've had our controversies in the past,''
Nicoll said in an interview. ''We want to move forward and put
the past in the past.''
Citron said he left because Datek had achieved his goals and
he wants to start a new company and spend more time with his wife
and young daughter.
''We now have 800 people -- we've done it all in 20
months,'' he said. ''Datek's regulatory issues have no bearing
whatsoever on my decision. It just feels right now.''
Datek in July raised $195 million from France's Groupe
Arnault and TA Associates, a Boston venture capital firm. Two
months earlier, Vulcan Ventures, a Seattle-based firm controlled
by Microsoft Corp. co-founder Paul Allen, opted out of a $300
million private stock sale on the final day, declining to say
why. The New York Times reported Vulcan withdrew because of
concerns about criminal and regulatory investigations of Datek.
SEC Fine
In May, the Securities and Exchange Commission fined Datek
$50,000 for filing false financial reports and illegally using
customer funds to pay bills in the spring of 1998. The firm's
former chief financial officer was also fined and suspended.
In 1997, the securities dealers association fined Citron
$20,000 and suspended him for 20 days for violating rules of the
NASD's Small Order Execution System, aimed at allowing small
investors' orders to receive treatment equal to that accorded
orders from large institutions. Also fined and suspended were the
firm, then known as Datek Securities Corp., and two of Citron's
fellow traders, Aaron Elbogen and Sheldon Maschler.
Maschler once worked for Robert Brennan, the former owner of
now-defunct penny-stock brokerage First Jersey Securities Inc.
who has been permanently barred from the securities business for
illegal sales tactics and price manipulation.
Citron has said he had no business connection to Brennan,
though he bought a jet Brennan once owned as well as a waterfront
mansion, which Citron razed to build a larger home.
Business Sold
In March 1998 Datek sold its professional day-trading
business -- where Citron worked from 1998 to 1992 -- to its
principals so it could focus on its online brokerage, the
industry's fifth largest, and the Island ECN Inc., the second-
biggest electronic order-execution network.
Citron said he isn't selling his Datek stake and has
committed to supporting Datek's board for two years.
''Ed's going to do a great job,'' he said. ''After all, I
hired the guy.''
Nicoll helped found what is now TD Waterhouse Group Inc.,
the fourth-biggest Internet broker by trading volume, in 1978. He
left more than 15 years later to get a law degree after the firm
was sold to Toronto-Dominion Bank.
John Frary, who recently retired as deputy general counsel
of Prudential Securities, succeeds Citron on Datek's eight-member
board.
The firm has enough cash to fund operations, including a
$120 million ad campaign, ''for the foreseeable future,'' Nicoll
said. It needs to go public to keep its best employees, he said.
''Part of our ability to attract and retain new young talent
is by being a pre-IPO company,'' he said. ''We have to at some
point give them a liquidity event.''
Travel, Then Work
Citron declined to disclose plans for his new ''stealth''
Internet start-up, other than to say it ''will change the world
again.'' First, he plans three weeks of family travel.
Datek is really two startups, the brokerage and Island,
that began operations less than three years ago, Citron said. In
that time Citron, and Nicoll, have hired a dozen top executives,
many securities industry veterans. Island has filed to become a
stock exchange while Datek this month starts the ad campaign.
''The private offering gives Datek everything it needs to
kill the world,'' Citron said. |
