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Is Etrade Safe and Legitimate Brokerage Firm or a Scam? Is Etrade SIPC/FDIC Insured? Etrade BBB Rating for 2020



Is E*Trade Safe?


If you’re thinking about opening a brokerage account, you’ll definitely want to do some research on the prospective firm before making a commitment and turning over your personally identifiable information. We’ve done all the digging you need to do on E*Trade; and here are the results:


E*Trade’s History


E*Trade got its start in the 1980’s as TradePlus. Adopting the name E*Trade, it placed the first online trade in 1983. In 1996, the company launched an IPO on the Nasdaq with ticker symbol ETFC (E*Trade Financial Corporation) where it has been trading ever since.

In 2004, E*Trade almost became “TD E*Trade” when TD Waterhouse tried to sell itself to the broker. Talks broke down, and Ameritrade acquired TD Waterhouse, creating TD Ameritrade instead.

In 2016, E*Trade purchased OptionsHouse and acquired its trading tools. Although this acquisition made the company larger, E*Trade remains smaller than many of the industry’s larger players.


Is E*Trade Legit


Size of E*Trade


E*Trade is headquartered in Arlington, Virginia. The broker-dealer has 30 local offices to assist millions of customers. E*Trade Financial Corporation (including both banking and brokerage businesses) has roughly $657 billion in assets. About $69 billion of this amount sits in the company’s bank accounts. The rest is in securities.

The nearly $600 billion in securities includes both retail and institutional clients, and both self-directed and managed accounts. Speaking of accounts, E*Trade has about 7 million of them.

The broker’s treasure chest has been growing steadily over the past several months, since 2018, according to its most recent filings with the SEC.

However impressive the numbers look, E*Trade is actually smaller than several of its rivals, including Fidelity, TD Ameritrade, Schwab, and Vanguard.


Is E*Trade Legitimate?


In the United States, brokerage firms are tightly regulated by multiple overseers, not least of which is FINRA. This group is tasked with creating rules that securities firms must follow. FINRA also enforces them with fines and sanctions.

E*Trade’s FINRA membership number is 29106. E*Trade helps to fund the organization with member dues, registration fees, and other contributions. Because FINRA closely monitors E*Trade to ensure compliance with ethical standards, it would be difficult for the brokerage house to pull off a major fraud.

FINRA maintains a profile of E*Trade. This website shows that 214 negative events have occurred since 1991. One example is an accusation that E*Trade failed to inform customers that a security was subject to redemption before its maturity date. Another complaint was over E*Trade’s supervision of its financial advisors. Typically, a broker will neither deny nor admit to such issues; but rather it will pay a fine to settle the case. That’s what E*Trade did in these cases.

E*Trade is also a member of the SEC, the U.S. government’s securities watchdog. The broker’s SEC registration number is 8-44112. With strict enforcement of laws and rules from both FINRA and the SEC, E*Trade customers have a lot of protections in place.

E*Trade is also a member of the Nasdaq, the Investors’ Exchange, and the CBOE.


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Is E*Trade SIPC Insured?


And E*Trade’s memberships don’t stop with those organizations, either. E*Trade participates in the SIPC insurance system, which protects American brokerage accounts up to $500,000. Technically, the insurance is valid per customer, not per account. That could be important in some situations. Half of the insurance limit can be used for cash balances.

It’s important to point out that SIPC only protects the number of shares in an account (up to $500,000 based on market price). It does not guarantee the market price. So if an investment in your brokerage account falls to $0 in price, there’s nothing SIPC would do in that unfortunate (but possible) situation.


Is E*Trade FDIC Insured?


It’s possible to keep the full half million for securities by moving cash balances to an E*Trade Bank account, where FDIC insurance is available. Because E*Trade has its own bank, FDIC protection is easily obtainable by the company’s clients.

The limit is $250,000. E*Trade does not offer a sweep program to increase it. Some brokerage firms nowadays offer more than $250,000 of FDIC coverage.

E*Trade has secured an extra insurance policy for anything SIPC fails to cover. Underwritten by London Insurers, the policy guarantees up to $150 million per customer (up to $900,000 in cash) with a $600 million aggregate limit. This policy would kick in only when SIPC protection was exhausted.


The E*Trade Complete Protection Guarantee


In addition to the insurance policies and regulatory monitoring, E*Trade also guarantees that its customers are not liable for unauthorized use of their accounts. The broker uses the latest technology to safeguard accounts as well.


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E*Trade’s BBB Rating


At the Better Business Bureau, E*Trade has a score of A-. The highest possible grade is A+. BBB says that it gave A- instead of A+ because the brokerage firm didn’t respond to two complaints that were filed against it.

We found 34 complaints that were closed in the past 12 months. These grievances revolved around billing issues, advertising, collections, and problems with services and products.

E*Trade has a feedback score of 1 star out of 5. This is a low score, but it is composed of just 16 customer reviews. Recall that E*Trade has several million customers. So the feedback on BBB’s page probably reflects just a handful of disgruntled customers.


Judgment: Is E*Trade Scam?


There is no evidence that E*Trade is a scam. On the contrary, it has customer satisfaction scores comparable to other brokerage firms in the U.S. Remember, though, that investing is inherently risky because asset prices can rise and fall quickly. Unlike bank deposits, market prices of brokerage assets are not guaranteed.


Recommendations


Smart investors will choose E*Trade for regular trading of stocks, ETFs, futures, and options. The broker’s commission schedule and excellent software combine to produce an excellent value.

The company would also be a wise choice for its large selection of mutual funds and fund resources. We do not recommend the brokerage house for IRA’s due to some needless $25 fees.