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Case Status:    DISMISSED    
On or around 03/31/2011 (Court's order of dismissal)

Filing Date: April 02, 2008

The original Complaint alleges that E*TRADE violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by deceiving investors about the investment characteristics of auction rate securities and the auction market in which these securities traded. Auction rate securities are either municipal or corporate debt securities or preferred stocks which pay interest at rates set at periodic “auctions.” Auction rate securities generally have long-term maturities or no maturity dates.

The Complaint alleges that, pursuant to uniform sales materials and top-down management directives, E*TRADE offered and sold auction rate securities to the public as highly liquid cash-management vehicles and as suitable alternatives to money market mutual funds. According to the Complaint, holders of auction rate securities sold by E*TRADE and other broker-dealers have been unable to liquidate their positions in these securities following the decision on February 13, 2008 of all major broker-dealers to “withdraw their support” for the periodic auctions at which the interest rates paid on auction rates securities are set.

The Complaint alleges that E*TRADE failed to disclose the following material facts about the auction rate securities it sold to the class: (1) the auction rate securities were not cash alternatives, like money market funds, but were instead, complex, long-term financial instruments with 30 year maturity dates, or longer; (2) the auction rate securities were only liquid at the time of sale because broker-dealers were artificially supporting and manipulating the auction rate market to maintain the appearance of liquidity and stability; (3) broker-dealers routinely intervened in auctions for their own benefit, to set rates and prevent all-hold auctions and failed auctions; and (4) E*TRADE continued to market auction rate securities as liquid investments after it had determined that broker dealers were likely to withdraw their support for the periodic auctions and that a “freeze” of the market for auction rate securities would result.

On June 11, 2008, Judge Sidney H. Stein consolidated the related cases and appointed John Oughtred, Roder Brenanhan and Srinivasan Murari as lead plaintiffs. The Court appointed Stueve Siegel Hanson L.L.P. as lead counsel. On December 18, 2008, the lead plaintiffs filed a First Amended Class Action Complaint. The defendants filed a motion to dismiss the First Amended Complaint on February 5, 2009.

On March 12 and 13, 2009, Plaintiff John W. Oughtred voluntarily dismissed his claims against the defendants in the action. On March 18, 2010, Judge Sidney H. Stein granted the defendant’s motion the amended complaint. If the plaintiffs wish, they may replead on or before April 15, 2010. On April 22, 2010, the plaintiffs filed a Second Amended Complaint, and the defendants responded by filing a motion to dismiss on June 4, 2010.

According to the Opinion and Order signed by Judge Sidney H. Stein on March 31, 2011, plaintiffs have not alleged facts supporting the strong inference of scienter required by extensive Supreme Court and Second Circuit authority in order to state a claim for relief pursuant to Section 10(b) and Rule 10b-5. Accordingly, defendants' motion is granted in its entirety and the second amended complaint is dismissed with prejudice.

COMPANY INFORMATION:

Sector: Financial
Industry: Investment Services
Headquarters: United States

SECURITIES INFORMATION:

Ticker Symbol: ETFC
Company Market: NASDAQ
Market Status: Public (Listed)

About the Company & Securities Data


"Company" information provides the industry and sector classification and headquarters state for the primary company-defendant in the litigation. In general, "Securities" information provides the ticker symbol, market, and market status for the underlying securities at issue in the litigation.

In most cases, the primary company-defendant actually issued the securities that are the subject of the litigation, and the securities information and company information relate to the same entity. In a small subset of cases, however, the primary company-defendant is not the issuer (for example, cases against third party brokers/dealers), and the securities information and company information do not relate to the same entity.
COURT: S.D. New York
DOCKET #: 08-CV-03295
JUDGE: Hon. Sidney H. Stein
DATE FILED: 04/02/2008
CLASS PERIOD START: 04/02/2003
CLASS PERIOD END: 02/13/2008
PLAINTIFF FIRMS NAMED IN COMPLAINT:
  1. Girard Gibbs LLP (San Francisco)
    601 California Street, Suite 1400, Girard Gibbs LLP (San Francisco), CA 94108
    415.981.4800 415.981.4846 · mail@girardgibbs.com
  2. Seeger Weiss LLP (New York)
    One William Street, Seeger Weiss LLP (New York), NY 10004
    212.584.0700 · info@seegerweiss.com
  3. Stueve Siegel Hanson LLP
    460 Nichols Road, Suite 200, Stueve Siegel Hanson LLP, MI 64112
    816.714.7100 816.714.7101 · info@stuevesiegel.com
No Document Title Filing Date
COURT: S.D. New York
DOCKET #: 08-CV-03295
JUDGE: Hon. Sidney H. Stein
DATE FILED: 04/22/2010
CLASS PERIOD START: 04/02/2003
CLASS PERIOD END: 02/13/2008
PLAINTIFF FIRMS NAMED IN COMPLAINT:
  1. Stueve Siegel Hanson LLP
    460 Nichols Road, Suite 200, Stueve Siegel Hanson LLP, MI 64112
    816.714.7100 816.714.7101 · info@stuevesiegel.com
No Document Title Filing Date