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The U.S. Commodity Futures Trading Commission (CFTC) today issued an Order filing and settling charges against units of online brokerage firm E*TRADE Financial Corp (NASDAQ:ETFC) – E*TRADE Securities LLC (E*TRADE Securities), an Introducing Broker, and E*TRADE Clearing LLC (E*TRADE Clearing), a Futures Commission Merchant – for non-compliance with applicable record-keeping rules and failure to diligently supervise. Both entities have their headquarters in Chicago, Illinois.
The CFTC Order finds that between October 2009 and January 25, 2014, E*TRADE Securities did not preserve and maintain certain audit trail logs for their customers. Similarly, E*TRADE Clearing did not preserve and maintain customer audit trail logs after becoming registered as a Futures Commission Merchant in February 2013.
Violations of Regulations 1.31 & 1.35
The Order finds that by not preserving and maintaining these records, E*TRADE Securities and E*TRADE Clearing violated Section 4g(a) of the Commodity Exchange Act (CEA) and CFTC Regulations 1.31 and 1.35.
Regulation 166.3 Violation
In addition, the Order finds that E*TRADE Securities and E*TRADE Clearing violated CFTC Regulation 166.3 by failing to implement policies and procedures to ensure the retention of these records and failing to respond to a previous warning from its vendor that it did not preserve these records
The CFTC Order requires E*TRADE Securities and E*TRADE Clearing jointly to pay a $280,000 civil monetary penalty and to cease and desist from further violations of the CEA, as charged. To prevent similar problems in the future, the Order also requires E*TRADE Securities and E*TRADE Clearing to improve their recordkeeping procedures by updating their policies and procedures and providing appropriate training to officers and employees regarding the CEA’s recordkeeping requirements.
The Order recognizes the cooperation of E*TRADE Securities and E*TRADE Clearing in this matter.