E*Trade fined $1 million by SEC

The firm will pay $1 million to settle allegations that it failed to abide by U.S. anti-money-laundering rules.

The Securities and Exchange Commission has fined two units of E*Trade Financial Corp. $1 million to settle allegations that they failed to abide by U.S. anti-money-laundering rules.
This is the first case of its kind to include a fine, according to the regulator.
The rules require that broker-dealers verify the identities of their customers and document their procedures for doing so.
The SEC order found that E*Trade Clearing LLC of Jersey City, N.J., and E*Trade Securities LLC in Menlo Park, Calif., failed to accurately document certain customer identification program practices and verify the identities of 65,442 of its customers as required by the USA Patriot Act and SEC rules.
The order noted that E*Trade had in place a program under which it specified that it would verify the identities of all holders of joint accounts.
However, between October 2003 and June 2005, New York-based E*Trade failed to follow the verification procedures set forth in its program and did not verify the identities of secondary accountholders in newly opened joint accounts, according to the SEC.
The SEC’s order further finds that E*Trade’s compliance failure was “systemic” and resulted from a “lack of a cohesive organizational structure [and] lack of adequate management oversight.”
Both brokerages agreed to settle the action without admitting or denying the allegations.