E-Trade Agrees To Pay $350K To End FINRA Claims It Failed To Prevent Manipulative Stock Trading

Top Class Actions’s website and social media posts use affiliate links. If you make a purchase using such links, we may receive a commission, but it will not result in any additional charges to you. Please review our Affiliate Link Disclosure for more information.

E-Trade Manipulative Stock Trading Case Overview: 

• Who: E-Trade has agreed to pay $350,000 to settle allegations brought against it by the Financial Industry Regulatory Authority (FINRA). 
• Why: FINRA claims E-Trade failed to design its platform to protect against instances of manipulative trading on its online platform.
• Where: E-Trade is headquartered in New Jersey and available to investors nationwide

E-Trade has agreed to pay $350,000 to resolve allegations brought against the online trading platform by the Financial Industry Regulatory Authority (FINRA). 

The company will pay FINRA $144,500 with the rest going toward stock exchanges, including NYSE Arca and Nasdaq, according to a consent letter published Jan. 10.

FINRA claimed that, from December 2016 through most of 2021, E-Trade did not have adequate safeguards in place to keep cases of manipulative trading from occurring on its platform, which supports stocks and futures contracts trading, among other things.

According to FINRA, E-Trade, a subsidiary of Morgan Stanley, did not design its platform in a way that would be able to detect manipulative activity, such as instances of wash trading or pre-arranged trading. 

Securities with lower price points and those that weren’t heavily traded by investors were most affected by the alleged design flaw, according to FINRA. 

“During the relevant period, E-Trade’s surveillance system was not reasonably designed to detect certain types of potentially manipulative trading,” the regulator said. “Specifically, E-Trade did not have surveillance reasonably designed to detect trading that artificially increased or decreased the price of thinly traded stocks.” 

2017 Policy Revision Hurt Ability To Detect Manipulative Activity

FINRA alleged E-Trade also failed to properly control instances of end-of-day transactions done to pump up a security’s closing price.

According to FINRA, E-Trade revised its policy in 2017 to identify trades and orders that were done in the final minute of the trading day, which the regulator argued “rendered them too restrictive to reasonably detect potential marking-the-close activity, especially in lower-priced securities.” 

E-Trade is not admitting or denying the FINRA allegations by agreeing to the settlement, according to the filing. 

In 2020, a class action lawsuit was filed against E-Trade by oil traders who claimed a technical glitch caused them to lose money after crude oil prices dipped into the negative. 

Have you used E-Trade’s online trading platform? Let us know in the comments!

Read About More Class Action Lawsuits & Class Action Settlements:

• Robinhood Stock Halt Class Action Denied Class Certification on Technicality
• Robinhood Hack Class Action Moves Forward After Judge Rules Sufficient Evidence
• $568 Million Paid to Bernie Madoff’s Ponzi Scheme Victims, Totaling $18 Billion Recovery
• Yelp Can’t Shake Class Action Alleging it Misled Investors Over Expected Revenues