SEC Charges Current and Former E*TRADE Subsidiaries with Improperly Selling Penny Stocks through Unregistered Offerings

The SEC announced an enforcement action against current and former brokerage subsidiaries of E*TRADE Financial Corporation for failing in their "gatekeeper roles" and improperly engaging in unregistered sales of microcap stocks on behalf customers.

According to the Order, E*TRADE Securities and E*TRADE Capital Markets sold billions of penny stock shares for customers during a four-year period, notwithstanding red flags that the offerings were being conducted without an applicable exemption from the registration provisions of the federal securities laws.

In addition to the enforcement action, the SEC staff published a Risk Alert and FAQregarding broker-dealers' obligations when engaging in unregistered transactions on behalf of their customers.

See: SEC Order.Related news: SEC Issues Risk Alert and FAQ Regarding Customer Sales of Securities (October 9, 2014).