ETrade: RoaringKitty GameStop Controversy, and Notable Violations

Who is ETrade?

E-Trade Financial Corporation, now part of Morgan Stanley, is a financial services company offering an electronic trading platform for stocks, preferred stocks, futures contracts, exchange-traded funds, options, mutual funds, and fixed-income investments. Additionally, E*Trade provides services such as employee stock ownership plans, student loan benefit administration, advisor services, margin lending, and online banking. The firm generates revenue through interest income on margin balances, commissions from order executions, and payments for order flow.

ETrade and RoaringKitty

ETrade has recently considered removing RoaringKitty, also known as DeepFuckingValue, from its platform. This consideration stems from concerns about potential stock manipulation related to his recent purchases of GameStop ( $GME) shares. RoaringKitty, a well-known figure in the trading community, gained significant attention during the GameStop trading frenzy. His posts and analysis have influenced many retail investors. ETrade’s move reflects the broader scrutiny and regulatory concerns about the impact of social media and influential traders on market dynamics.

E*Trade is considering removing RoaringKitty, also known as DeepFuckingValue, from the platform due to reported concerns about potential stock manipulation related to his recent GameStop ( $GME) purchases. — InvestorTurf (@InvestorTurf) June 3, 2024

ETrade Violations

• In 2016, ETrade Securities LLC was censured and fined $900,000 by the Financial Industry Regulatory Authority (FINRA) for failing to review the quality of execution of its customers’ orders and for supervisory deficiencies regarding the protection of customer information.
• ETrade agreed to pay a $350,000 fine to FINRA after allegations that it allowed manipulative customer trading to occur.
• A consent letter signed by FINRA and E*Trade stated that the company failed to establish and maintain a supervisory system for detecting potentially manipulative trading by its customers from February 2016 through November 2021.
• ETrade paid $2.5 million to settle SEC charges for ignoring red flags and improperly selling billions of unregistered penny stock shares on behalf of customers. The SEC claimed that ETrade Securities and E*Trade Capital Markets (later G1 Execution Services LLC) failed in their role as a “gatekeeper” of securities and sold shares without verifying if they met the required exemptions.