WASHINGTON—E-Trade Financial Corp. on Wednesday agreed to pay $1 million in a settlement with federal regulators who accused the retail brokerage firm of failing to verify more than 65,000 customers' identities to prevent money laundering.
The Securities and Exchange Commission announced the settlement with two divisions of the New York-based company, E-Trade Clearing LLC and E-Trade Securities LLC. The brokerage firm also agreed to be censured and to hire an independent consultant to oversee the adequacy of its program to comply with anti-money-laundering rules.
E-Trade neither admitted nor denied wrongdoing in the settlement, but did agree to refrain from future violations of federal securities laws.
"E-Trade fully supports the SEC in its efforts to curb the exploitation of the financial services industry by those who would seek to do harm to others," the company said in an e-mailed statement.
The SEC alleged that from October 2003 to June 2005, E-Trade failed to verify the identities of 65,442 secondary account holders in newly-opened joint brokerage accounts, a breach of federal rules and the brokerage firm's own procedures. The agency said E-Trade's failure to comply with the rules was "systemic," resulting from the lack of a cohesive organizational structure, inadequate management oversight and miscommunication among company employees.
Shares of E-Trade fell 5 cents, or 1.6 percent, to $3.01 Wednesday.
