Ohio investors in E*Trade Securities, Inc. were able to rescind $4.3 million in investment losses as a result of an agreement between the Ohio Department of Commerce's Division of Securities and the company. E*Trade's parent company announced last week that it paid $4.3 million to Ohio investors during its most recent financial quarter.

"I am extremely pleased that the Ohio Department of Commerce's Division of Securities could assist in the return of millions of dollars to Ohio investors," said Director of Commerce Donna Owens. "This action sends a strong message that we will enforce Ohio's securities laws to provide maximum investor protection."

Through a series of clerical errors, the California-based company, which describes itself as the largest and fastest-growing securities dealer on the Internet, failed to renew its Ohio securities dealer license at the beginning of 1997. After E*Trade Securities re-applied for a license, the Division of Securities discovered that E*Trade had engaged in more than 18,500 unlicensed transactions in Ohio between January 1 and April 14, 1997. During this period, the securities dealer increased its Ohio customer base from approximately 600 to 1,700 clients.

Following an examination of E*Trade's operations, the division determined that the company's compliance procedures were fundamentally sound, particularly after they had revised their procedures to protect against future license lapses.

The Division issued a new license to E*Trade Securities on April 15, 1997 after the company agreed to offer to rescind all purchases made by Ohioans during the unlicensed period, and to consent to an Order to cease and desist from future violations of the Ohio Securities Act. Ohio Securities Commissioner Thomas E. Geyer said that Ohio law grants the purchaser of a security in an unlicensed transaction the right to rescind the purchase for up to two to four years from the date of the violation. By notifying Ohio investors under the terms of the agreement, E*Trade Securities was able to identify and limit the scope of its liability after 30 days.

"We wanted to craft a win/win result," Commissioner Geyer said. "E*Trade Securities is again licensed in good standing in Ohio, and they have limited their liability for the sales made in violation of the Ohio Securities Act. Ohio investors have benefited from this agreement without needing to go to court to exercise their rescission rights under Ohio law." Commissioner Geyer added that E*Trade's cooperation was essential in reaching this mutually beneficial result.

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The Division of Securities promotes an honest and fair securities market where individuals and businesses can raise capital and investors can expect a fair return on their investment. Other Commerce divisions enforce regulations regarding industrial compliance, financial institutions, real estate, auctioneers, and unclaimed funds, among others. The former Department of Liquor Control joined the Department on July 1, 1997 as the Division of Liquor Control.