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E*Trade “Heard Us” and Pays Off $100 Million ARS

Posted by Larry Doyle on October 25, 2011 7:35 PM |

Let there be no doubt that public pressure appropriately applied can bring real results in the midst of little courage displayed by far too many in the world of financial regulation. How so?

The North American Securities Adminstrators Association recently announced a settlement with E*Trade Securities LLC in which that financial institution will return approximately $100 million to firm clients who have had their funds frozen in ARS—those supposed cash surrogate money market alternative investments—since February 2008.

This settlement is better than any other settlement I have witnessed over the last three years. The specifics include: 

E*TRADE agreed to buy back at par value all outstanding auction rate securities purchased through the firm by individual investors before February 2008. Other terms of the multi-state settlement require E*TRADE to:

>Fully reimburse all individual investors who sold their auction rate securities at a discount after the auction market failed;

>Consent to a special, public arbitration process to resolve claims of consequential damages suffered by individual investors who were unable to access their funds;

>Maintain a dedicated toll-free telephone assistance line, website and email address to provide information about the terms of the final order and to answer questions from investors;

>Reimburse certain investors for the cost of loans after the investor took out a loan from E*TRADE because the investor’s auction rate securities were frozen; and

>Pay to the states monetary penalties of $5 million and reimburse certain costs of the investigation.

This announcement is clearly great news and the end of a three and a half year nightmare for these individual investors.

Do not think for a second, though, that this settlement merely happened out of the mere generosity of E*Trade’s heart. The simple fact is a number of private individuals and financial regulators in selected states have doggedly pursued E*Trade on this ARS front for the last few years.

Let’s rewind the Sense on Cents tape and reflect back to early August 2010 when a single individual E*Trade investor shared his story and expressed his gratitude to the Colorado Attorney General for pursuing an ARS case against E*Trade. I captured this individual’s sentiments in writing, “E*Trade, Can You Hear Us Now?

MY SAGA OF HOW PERSISTENCE FINALLY PAID OFF IN COLORADO in the auction rate security sales fraud by E*Trade.

“I never surrendered nor gave up. The Empire struck back vs the Evil Dark Side of the Sith on this one, it only took me since June of 2008 to get the Colo AG to do this! Sort of like Luke Skywalker finding that one small vunerable spot on the Death Star.

A lot of credit has to go to my Congressman an Ed Perlmutter (D) 7th Dist CO. Yes, I know he is a Dem., however he made himself available to me to meet him in person in mid-May this year regarding this matter, and he said he would “get on it” !

This gentleman is the ONLY ONE in “power” who would EVER listen. I will campaign for him this fall. ( I would not care if he was TEA Party or a communist, he works for the little people here in Colorado.)

He actually interceded and prodded the AG’s office in CO to finally act! Of course they had documentation from me and 39 others to support this.

E*Trade fought it and fought it, and denied, and fought it again, I understand, finally Fred Joseph did the right thing! Kudos to him as well.

Persistence…….I have invested probably over 1000 man hours in 30 months on this matter, I started by writing Prez. Bush to Obama and all in between, (Regulators etc, FINRA, SEC )that you could imagine.

It almost cost me a divorce, and I had to get treated for anxiety and high blood pressure from this stress. Half of my life saving are at stake, and I have a son who is going to college next year.

I worked 20 years for this money and E*Trade effectively stole it.

I could go on and on, and describe the direct abuse I had to endure from them, but you get the idea. Can you image in April 2008 some E*Trade rep. called me at home at 3:00am from a blocked cell number and told me I would be sorry if I proceeded and continued to file my complaints!!?? What kind of thugs are they?!

Fortunately, I am a strong 62 year old, as many would have given up!  I made this a crusade for a just cause! I have a deep thanks to give you ( ref : Larry Doyle ), as it was/is your site that at times gave me the courage to go on, when I saw there were voices out there like you with courage to expose this.

A Million Thanks for all of your efforts L.D.!!!  You are a hero in my mind! (LD’s edit: No, I’m not!!)

I hope the other 39 victims in Colorado appreciate it, some had 10X more at stake than I, unbelievable how they just rolled over.


To this individual, the recent settlement is a clear indication that E*Trade heard you. I can assure readers that the persistence of this one individual had a meaningful impact on the State of Colorado pursuing its case against E*Trade in the first place.

There were others who also would not be denied. I commend them as well. I see no sign of the SEC or FINRA in this investigation or settlement. Where are they? Isn’t it their mandate to protect investors? Helloooo??!!

Jack E. Herstein, NASAA President and Assistant Director of the Nebraska Department of Banking & Finance Bureau of Securities,

….commended the work of state securities regulators in Colorado and Texas, who participated in the investigation and settlement negotiations, as well as those in North Carolina and Pennsylvania, who participated in the investigation.

Aside from these regulators and selected investors, who and what else may have impacted this settlement with E*Trade. Readers here may recall that I referenced earlier this year that a documentary on the ARS crisis was in the works. Is it possible that the message embedded in that expose created pressure which led to this settlement?

For those E*Trade investors who may now finally be able to rest easy, this settlement is fabulous news and LONG overdue.

For the thousands of others who continue to have their billions of dollars frozen in ARS, the fight continues.

I now call on the NASAA to take this E*Trade settlement and use it as the precedent to publicly pressure and compel each and every other institution still holding out on making their ARS clients whole to do so forthwith. Every individual still holding frozen ARS, I strongly recommend you to take this story directly to your NASAA state regulator.

44 months of waiting to be made whole on securities marketed and distributed as cash surrogate money market alternatives is far too long and far too painful for any individual or institution to have to suffer.

Questions, comments, constructive criticisms encouraged and appreciated.

Larry Doyle

Isn’t it time to  subscribe to all my work via e-mail, an RSS feed, on Twitter or Facebook? Do your friends, family, and colleagues a favor and get them to do the same. Thanks!!

I have no affiliation or business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets, our economy, and our political realm so that meaningful investor confidence and investor protection can be achieved.

  • Dave

    You’re giving too much credit to individual investors. OPpenheimer and ray James clients fought hard too and we got screwed with bad settlements and no settlement. It all comes down to who the enforcing agent is and how much they can snow the regulators.

    Oppenheimer clients with large sums frozen will never get out. Neither will Raymond James clients. Yes, a battle has been won here, but we lost the war. I am ashamed of this country. I hate the United States.

  • Dave

    The North American SEcurities ASsoc is a bunch of morons. Oppenheimer & Ray James clients are still not whole. This is a drop in the bucket. The firms won, the clients lost, stop trying to spin this as a victory. Sure, the little guy won this one battle we they lost the war to the firms who will always win.

    • LD


      I empathize with you and feel your pain and acknowledge the facts you present but the war, as you define it, is NOT over.

      For those involved with E*Trade this is very much a victory.

      Not for nothing but there are not that many out here who have carried the fight as endlessly as this blog.

      • Dave


        Your last sentence I agree with – you have fought the good fight for ARS sufferers.

        Regarding the one individual E trade client who waged this crusade – yes, kudos are due, deservedly. But it bears pointing out that other individuals have been just as tireless in pursuing other firms but because of inept, probably corrupt New York regs (Oppenheimer) and completely falling through the cracks (Ray James.)

        • LD


          Believe me, I fully appreciate that there are a multitude of investors who have fought the good fight and continue to fight that fight.

          Additionally, I would never minimize nor denigrate anybody’s efforts. I hope my writing did not come off in that fashion. In regard to the regulators at both the state and federal level, to say that the majority of them are ill-equipped to handle this mess would be kind. Most of them are incapable of taking on these firms who sold the ARS.

          I am hopeful that the documentary which I reference will air eventually as I think it could create further public pressure. That said, I am concerned that the powers that be, whomever they are, will work to see that the show never airs.

      • liz

        I agree wholeheartedly with you Larry. The individual in Colorado was dogged in his pursuit to obtain justice from E*TRADE. He contacted every agency out there, was threatened by E*TRADE Legal, was hung up on, etc. and after more than 3+ years, he has triumphed. It’s pretty amazing that one person has made such a difference and impacted so many others.

        I’m not sure if I will get my money back from my ARPs purchases that I bought at ET in Oct. 2007 as I have switched to another brokerage house but I couldn’t be prouder of the man from Colorado.

  • Gerry

    Agreed. Oppenheimer got away with murder. Their clients will never get their money back. Nobody should ever invest with those criminals.

  • marc

    Dave, can you please provide more information about the individual who is being pursued by e*trade for committing illegal acts. So investor is locked in ars than gets sued by the firm who put them in it? What am i missing?

  • liz


    This is INCREDIBLE NEWS that ET will finally redeem the ARPS that they sold so fraudulently but I have a concern/question for you!!

    I bought a large amount of ARPs from E*TRADE at the end of 2007. I was SO disgusted with E*TRADE for being so dishonorable about redeeming the ARP’s and for not even acknowledging the problem that I switched my account to TD. TD won’t redeem them for me because I bought them at E*TRADE. So… my question… Do you think E*TRADE is going to redeem them for me now that I am no longer one of their clients?? I did buy them at ET and can prove it. Your thoughts? Any idea when E*TRADE plans to make their ARP’s “victims” whole?


    • LD


      I wish I could be more optimistic for you but I am not so sure that E*Trade or any other entity for that matter has been willing to redeem ARS/ARPS for clients who had moved their accounts.

      Is that fair or right? Of course not. Regrettably little has been fair or right about this travesty from the beginning.

      I would strongly encourage you to contact the NASAA in your home state as well as the NASAA office in Colorado to get more input.

      I hope you finally get some satisfaction.

      I regret to inform you that I have recently learned that the ARS documentary which I have highlighted will NOT be aired.

      I cannot begin to tell you my feelings about that.

      • liz


        I am so sorry that your documentary will not be aired. You can’t give up!! You’ve put so much hard work and effort into this project in an effort to hold these firms accountable and to get a cautionary word out to the public. Your documentary needs to be aired so people fully understand the fraudulent nature of all of this and further so that people are made clear that these institutions made a conscious choice to lock up their client’s money in spite of their client’s numerous pleas to redeem their arps.

        Note: I called up E*TRADE today and they sent me the supporting documentation stating that they “will” redeem the ARPs at par for both current and previous customers. Once final settlement takes place, Customers that wish to be redeemed, will have their ARPS redeemed within 60 days following the settlement. This was a huge relief. Once I the arps are fully redeemed, I will celebrate…

        Don’t give up on your documentary!! I’m sure it is amazing. No one understands the travesty of all of this better than you. You have been an absolute godsend having this website. Your site has been so critical to me. It’s been extremely informational and insightful and has served as a terrific support system.

        • LD


          I am thrilled to hear that you will be made whole. Please let us know how that proceeds.

  • Rob

    I just ran across this website for the first time. I want to encourage you or whoever is producing the documentary to continue. Even without a broadcast, there are venues to monetize production costs, and distribution channels that don’t require the corruptly controlled mainstream media. If someone is determined to tell the story through a documentary, it can be distributed and viewed by people throughout the world. Even a website could be setup for donations/sales of it. Don’t give up on the production. This is a story that needs to be told.

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