The SEC brought an enforcement action against current and former brokerage subsidiaries of E*TRADE Financial Corporation that failed in their gatekeeper roles and improperly engaged in unregistered sales of microcap stocks on behalf of their customers. Specifically, the SEC found that E*TRADE Securities and E*TRADE Capital Markets sold billions of penny stock shares for customers during a four-year period while ignoring red flags the offerings were being conducted without an applicable exemption from the registration provisions of the federal securities laws. E*TRADE Securities and E*TRADE Capital Markets (now G1 Execution Services) agreed to settle the SEC’s charges by paying back more than $1.5 million in disgorgement and prejudgment interest from commissions they earned on the improper sales. They also must pay a combined penalty of $1 million. SEC
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