In the CharlotObserver.com article written by David Bracken, he writes that E*Trade Securities will pay a $25,000 civil penalty under a settlement reached with the state over auction rate securities it sold to North Carolina investors.
In the past, auction rate securities were often marketed to investors as short-term investments that could easily be sold for cash on short notice. But market for the products disappeared in early 2008, leaving investors trapped holding products that could not be resold.
Bracken writes that the settlement, announced by the Secretary of State’s Office today, required E*Trade to show the state that it had made investors “whole,” meaning they had reached some form of satisfactory deal with them. E*Trade will also reimburse the state $400,000 for investigation costs related to the case.
When the markets froze, E*Trade had at least 47 North Carolina investors holding roughly $8,375,000 in ARS products.
In the article the state said its investigation had found that E*Trade regularly represented ARS products to customers as safe investments suitable for short-term cash management purposes.
It found that salesmen had not been properly trained by the company to sell the products and had failed to consistently failed to disclose the risk that, if the auctions failed, clients would not be able to sell their auction rate securities and could be stuck with illiquid investments.
“This is the first case in the country where E*Trade has signed a settlement concerning its role in selling auction rate securities to misled investors,” Secretary of State Elaine F. Marshall said today in a release. “We are incredibly pleased to be the first state where we were able to make sure the investors have been made whole, where a fine has been levied, and where the bad practices used have been made public.
The settlement, announced by the Secretary of State’s Office, required E*Trade to show the state that it had made investors “whole,” meaning they had reached some form of satisfactory deal with them.
If you feel you have also been an alleged victim of E*Trade Securities, please call a Securities Arbitration Lawyer for a free consultation on how to recover your losses. To speak with an attorney, call 888-760-6552, or visit www.stockmarketlawsuit.com. Soreide Law Group, PLLC., representing investors nationwide before FINRA the Financial Industry Regulatory Authority.