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E*Trade Busted For Improperly Trading "Billions" Of Penny Stocks Over 4 Years
As American stock markets become CYNK'd with ever shorter horizons and ever greater aspirations of 'getting rich quick', we thought it fascinating that none other than E*Trade - that bastion of once day-trading prowess and now investing-for-retirement Type-E expertise - has been busted by the SEC for failing in their gatekeeper roles and improperly engaged in unregistered sales of microcap stocks on behalf of their customers. Remember, as the baby explains, "making a big investment is as easy as a single-click..." and so it was that E*Trade sold billions of penny stock shares for customers during a four-year period while ignoring red flags.
As The baby explains... It's easy!!
An SEC investigation found that E*TRADE Securities and E*TRADE Capital Markets sold billions of penny stock shares for customers during a four-year period while ignoring red flags that the offerings were being conducted without an applicable exemption from the registration provisions of the federal securities laws. E*TRADE Securities remains an E*TRADE subsidiary while E*TRADE Capital Markets was sold earlier this year and is now called G1 Execution Services.
E*TRADE Securities and G1 Execution Services agreed to settle the SEC’s charges by paying back more than $1.5 million in disgorgement and prejudgment interest from commissions they earned on the improper sales. They also must pay a combined penalty of $1 million.
In addition to the enforcement action, the SEC staff today published a Risk Alert and FAQs to remind broker-dealers of their obligations when they engage in unregistered transactions on behalf of their customers.
“Broker-dealers serve an important gatekeeping function that helps prevent microcap fraud by taking measures to ensure that unregistered shares don’t reach the market if the registration rules aren’t being followed,” said Andrew J. Ceresney, Director of the SEC’s Division of Enforcement. “Many billions of unregistered shares passed through gates that E*TRADE should have closed, and we will hold firms accountable when improper trading occurs on their watch.”
According to the SEC’s order instituting a settled administrative proceeding, the failures by E*TRADE occurred periodically from March 2007 to April 2011. The securities laws generally require all offers and sales of securities to be registered with the SEC unless those offers and sales qualify for an exemption. When brokers facilitate an unregistered sales transaction on behalf of a customer, they must reasonably ensure that an exemption does indeed apply.
The SEC’s order finds that three customers of E*TRADE routinely deposited to their E*TRADE accounts large quantities of newly issued penny stocks they had acquired through private, unregistered transactions with little-known, non-reporting issuers. The customers claimed that these penny stocks were “freely tradable” and they placed orders for E*TRADE to sell the securities to the public through “resales” without any registration statements in effect. Following the resales, the customers immediately wired the sales proceeds out of their accounts.
According to the SEC’s order, E*TRADE encountered numerous red flags indicating potential improper sales of securities. Nevertheless, the firm relied on a registration exemption for broker-dealers that permits them to execute a customer’s unregistered sales of securities if, after a reasonable inquiry, the broker-dealer is not aware of circumstances indicating that the customer is violating registration requirements. E*TRADE initially failed to identify any exemptions potentially available to these customers. When it later identified the purported exemptions upon which the customers claimed to be relying, E*TRADE failed to perform a searching inquiry to be reasonably certain that such exemptions applied for each unregistered sale executed by the three customers.
“E*TRADE failed to fulfill its obligation to determine whether any exemptions applied to the sale of billions of shares of securities thereby depriving investors of critical protections under the federal securities laws,” said Stephen L. Cohen, Associate Director of the SEC’s Division of Enforcement. “Firms must take their reasonable inquiry obligations seriously and do more than check the box, particularly when red flags are apparent.”
The SEC’s order finds that E*TRADE Securities and G1 Execution Services violated Sections 5(a) and 5(c) of the Securities Act of 1933. In addition to the monetary sanctions and without admitting or denying the SEC’s findings, the two firms agreed to be censured and consented to the order requiring them to cease and desist from committing or causing any future violations of the registration provisions of the Securities Act.
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E-trade busted? Well I'll be a poopie diaper
E*Trade Baby wasn't yet around for days/months/years like 2000, 2001, 2008, 2009, etc, and will hurl Gerber strained peas everywhere at first taste of a real correction.
E*Trade Baby should 'double Pamper up,' because Grandma Yellen does not actually care about E*Trade Baby.
And Ken Griffin from Citadel is laughing ... If you dont know, he is the main puppet behind E*trade BS. He took them to the cleaners too ...
http://www.forbes.com/sites/afontevecchia/2013/03/14/griffins-e-trade-move-billionaires-citadel-to-sell-as-stock-hits-52-week-high/
He was probably behind all of this?
I never trusted him...
And then on to HFT manipulation and games.
Of course we should all give him billions cause he is just adding liquidity to the free market.
FUCKING SLEEZEBAG
I should get some money back on this but the SEC will probably keep it all.
1933 was a good year
You will get back your fair share, after lawyers and admin fees, amounting to 88 cents.
What? It's a Casino?
Is that why the ads are similar?
I'm shocked I tell you! Shocked! Make it funny!
Where the fuck are MF Global and Jon Corzine!?!?
Fool 'em with a white jacket, a suit and tie, or a joke!
Looks like somebody at E-trade forgot to make their monthly secret hush-money payment to SEC officials.
Nah, they just put that clueless fuck Steve "Skippy" Frieberg in charge at the beginning of this- he wouldn't know an unregistered security if it bit him in the ass....
Duh!
That ETrade baby is annoying as fuck but not nearly as obnoxious as Stewart in the god awful Ameritrade commercials.
Well if sweet little Stewart can do that with the market, then I should be a fucking billionaire. I am switching to Ameritrade right now.
That'll teach'em, only GS and their friends can do that kind of shit...
What's E*Trade?
It's like a Nintendo system for muppets that was popular in the late 90s.
Oh. so its for fat middle/upper middle class white dudes to gamble their life savings in the stawk market at home with their hair on fire buying stawks that they know are going to the moon so they leverage 50% or more to get maximum returns (ya know cause thats what Fast Money said) buying into the advertising hype they are real traders and are cool talking to their buddies at the bar in stawk market lingo about buying corn futures (cause they need to buy corn lol) all in a nice GUI so all they have to do is click a button and now they are traders like I am a sniper in Call Of Duty? Sarc off/ Oh and should I be excited I got my first up vote on ZH?
Good to see the SEC going after the major criminals.
I predict Baby Finster will be tried as an adult.
Thats funny!
If they are awake enough to do that then they should just go ahead and bust Morgan Stanley and throw somebody in jail for systematically skimming and stealing from virtually every foreign exchange transaction involving pension accounts over the last 25 years.
Billions of pensioner money stolen, a 'little' everyday. It was indeed the Flow.
Florida won settlement from BNYM and State Street for skimming pension money via currency markets for some 40 years.
Oh, no prosecutions.
I don't know yet who took their place
"Oh, no prosecutions."
Loved this, because you hear it everytime. "Really Big Corporation paid a fine today for X amount of dollars. However, they claim there was 'no wrongdoing.'"
I wonder if I can use that at a future murder trial. "Yeah, I killed the bitch, but I admit there was no wrongdoing!" I can dream on, I'm not State Street nor do I have access to a Fed Window.
$2,500,000 fine. Must be good to be a gangsta.
"Why the big banks and brokers Mr Prosecutor?"
"Because that's where the money is."
Good thing they have not confiscated all of their money. YET.
We are next.
Free John Corzine!
"Semper Liber"
Fritz du Lieber. How can yousay such a thing!
"thereby depriving investors of critical protections under the federal securities laws"
The SEC's "protections" and $5 will buy you a cup of coffee at Starbucks.
"Like taking candy from a baby."
Lets just put it this way, the way the system is setup, a bank/financial firm/brokerage could rob you of your life savings, home, car and whatever else they need to steal from you in order to get you to jump off a bridge in a timely manner, and if you ever do get to see a day in court, chances are the judge will fine them a few measly thousand dollars, give you like 500 bucks and tell you to expedite your trip to the bridge.
Thats just how things run, everything's a fucking scam and justice is only blind to the truth that shes a whore, that blindfold aint a blind-fold its a bukkake shield, bankers sit around Justice Circle Jerking all over that bitch and her stupid broken scales.
Love that E baby video. Treasure trove. What a shocker that fraud caught up with them.
There is a beautiful facility located in Greenville, SC; as your driving south on I-85. Lots of office glass windows.
/sarc
So the SEC stops jerking off long enough to go after... retail?
for 2.5 million?
Fucking joke.
I guess they got tired of fapping to free internet porn, and needed cash for some primo blu-rays.
The SEC is run like the Secret Service.
Without direction from the top, nothing gets done.
Is that microcap or microcrap they are talking about?
There all in cahoots
TradeStation Commercial - Chopper - YouTube
As it turns out, the funniest thing about the E-Trade baby commercials is they weren’t supposed to be a joke.
Those babies precisely represent the level of investing sophistication the company seeks in its target customers.
They got shankapotomized
So wait, we support government regulation here? And oh man, $2.5 million fine is big news.
I prefer to play lotto.
The morons are in abundance within the society.
And just like the banksters, we won't see a single stock-trading baby doing a perp walk...