E*Trade Clearing LLC (CRD #25025, Jersey City, New Jersey)
Acceptance, Waiver and Consent in which the firm was censured and fined $350,000.
It was announced, without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that it introduced several new money market sweep funds and, when entering certain back-office processing instructions relating to some of the funds, the firm made an error that resulted in the system failing to recognize these fund positions and customers being erroneously charged margin interest for that day. The findings stated that when the firm became aware of this coding error and corrected the problem, it did not identify or reimburse affected customers until later in the year; the firm reimbursed affected customers a total of $43,938.57 in erroneous margin interest charges several months later. The findings also stated that the firm acquired customer accounts through conversions from other firms, and it erroneously charged margin interest to conversion customers who traded options.
The findings also included that the firm failed to designate an employee to review, reconcile and resolve fractional share differences between its Depository Trust Company (DTC) position and the actual quantity of securities on deposit at the DTC.
Also, FINRA found that the firm’s systems failed to accept delivery instructions if customers had pending dividends or unsettled positions in their accounts.
FINRA also found that the firm failed to establish a system reasonably designed to supervise and written procedures reasonably designed to prevent and/or correct erroneous margin interest accruals in customer accounts holding certain money market sweep funds, prevent and/or correct erroneous margin interest charges to converting customers who traded options at the time of the conversion and had available cash in their accounts, ensure the review and reconciliation of fractional share differences with the DTC, and ensure the prompt transfer of physical certificates to customers.
FINRA determined that the firm failed to accurately mail account statements to customers, liquidated fractional shares in customer accounts without their authorization and failed to report customer complaints in an accurate and timely manner.
In addition, FINRA determined that, in connection with its conversion to a new back office system, a functionality that impacted the segregation of long positions in suspense accounts was not activated as required and, as a result, the firm’s possession and control system failed to issue segregation instructions on long positions in suspense accounts.
(FINRA Case#2007009471101)This information was obtained from FINRA’s website.
If you feel you are a victim of the alleged fraudulent schemes of E*Trade Clearing, LLC, call a FINRA 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 and the NFA.
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