Faruqi & Faruqi, LLP is Investigating E*Trade Financial Corp. (ETFC) on Behalf of its Shareholders
Faruqi & Faruqi, LLP, a leading national securities law firm, is investigating potential misconduct at E*Trade Financial Corp. (“E*Trade” or the “Company”) (Nasdaq:ETFC).
The investigation focuses on whether the Company’s Board of Directors and/or its officers committed mismanagement and breached their fiduciary duties for failing to establish and/or maintain an effective system of internal controls. On June 2, 2016, the Financial Industry Regulatory Authority (“FINRA”) issued a press release announcing that it had censured and fined E*Trade Securities LLC (“E*Trade Securities”), a wholly owned subsidiary of the Company, a total of $900,000 for failing to conduct an adequate review of the quality of execution of its customers’ orders and for supervisory deficiencies concerning the protection of customer information.
According to the press release, E*Trade Securities provides online securities investing and trading services for retail customers, and routes its customers’ orders to various exchanges and non-exchange market centers. Firms routing customer orders are required to assess the quality of competing markets to which it directs order flow and periodically conduct “regular and rigorous reviews” of the quality of the executions of its customers’ orders to determine whether any material differences in execution quality exist among the markets trading the security. In an effort to comply with the foregoing, E*Trade established a Best Execution Committee (the “BEC”) to review execution quality it received on its customers’ orders.
FINRA found that, the BEC (i) lacked sufficiently accurate information to reasonably assess the execution quality it provided its customers; (ii) failed to take into account internalized order flow sent to its affiliated broker-dealer market maker G1 Execution Services (“G1X”); and (iii) failed to adequately consider the actual execution quality provided by the market centers to which it routed orders.
In addition, E*Trade Securities regularly accepted requests from G1X to change prioritization in E*Trade Securities’ order routing system and to redirect certain order flow, without determining whether these changes would improve the quality of execution received by its customers. Finally, FINRA also found that E*Trade Securities did not have adequate systems and controls in place to ensure that there was no misuse of confidential customer order information by individuals dually registered with E*Trade Securities and G1X.
If you currently own E*Trade stock and would like to discuss your legal rights, please fill out the form below. You can also contact us by calling Stuart Guber toll free at (215) 277-5770 or by sending an e-mail to firstname.lastname@example.org. Faruqi & Faruqi, LLP also encourages anyone with information regarding E*Trade’s conduct to contact the firm, including whistleblowers, former employees, shareholders and others.
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Stuart J. Guber
Faruqi & Faruqi, LLP
685 Third Avenue 26th Floor
New York, NY 10017
Tel: (212) 983-9330
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