E*Trade Securities LLC has agreed to return up to $20 million to California investors over allegations that the company misrepresented auction rate securities to investors as safe, cash-equivalent products, even though the products faced increasing liquidity risk.

The negotiation was reached with the California Department of Corporations. An auction rate security is a non-conventional, fixed income, long-term security whose dividend rates are reset periodically at auctions at set weekly or monthly intervals.

"This multi-million dollar agreement provides relief for many individuals and small business investors who lost access to funds in the collapse of the auction rate securities market," Commissioner Jan Lynn Owen said. "We are pleased that this negotiation with E*Trade will return money to many investors who suffered losses and illiquidity when the auctions failed and their assets were frozen."

Continue Reading for Free

Register and gain access to:

  • Breaking benefits news and analysis, on-site and via our newsletters and custom alerts
  • Educational webcasts, white papers, and ebooks from industry thought leaders
  • Critical converage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.