The Colorado Division of Securities today announced settlement of its enforcement action against ETrade Securities, LLC. related to its sale of auction rate securities to Colorado investors.
Under the settlement, ETrade agreed to buy back approximately $3.5 million worth of auction rate securities from Colorado investors. The investors found themselves unable to sell their securities after they had been frozen in the auction rate securities market, according to Fred Joseph, Colorado Securities Commissioner.
Joseph said the settlement concluded the division’s enforcement action to sanction ETrade’s license in Colorado.
According to the division, a hearing was held in June before administrative law judge Robert Spencer who issued an initial decision finding that ETrade willfully misrepresented material facts in connection with the sale of auction rate securities to Colorado investors. He also found that ETrade failed to adequately supervise its financial advisors who sold the securities to Colorado investors.
Joseph said the settlement also concluded a multi-state investigation of ETrade for its alleged role in the sale of auction rate securities. It allegedly made misleading representations to certain clients that auction rate securities were the same as “7 day paper” and were a suitable alternative to money market funds for liquidity purposes.
The settlement is the 15th Joseph has entered. Previous settlements include Deutsche Bank Securities, Citigroup Global Markets, Bank of American Securities, JP Morgan Chase, Merrill Lynch, UBS Securities and Wells Fargo.
Howard Pankratz: 303-954-1939 or hpankratz@denverpost.com.
