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I have read all of today's posts and I see there is a fair measure of misguided thinking out there.

I agree that the full extent of an E*Trade customer's stocks and other investment securities are probably safe and thus their disappearance is not a reasonable cause for concern.

I also agree that it is a bad idea to transfer your E*Trade investment securities to the dark side of your mattress.

Those issues, however, are not the issues if you are an E*Trade customer.

I will explain what I did today and why, as follows:

1. As a long-time E*Trade customer with a number of brokerage accounts there, I telephoned the SPIC (202-371-8300), but they are closed today. It is the SPIC, not the FDIC, that protects investment securities, assuming your brokerage firm is a member of SPIC. I believe E*Trade is an SPIC member, but I do not know for certain (more on that below). I also believe that SPIC only protects one's investment securities up to a certain total value.

2. Next, I called the FDIC and asked what happens if a U.S. brokerage firm files for Chapter 11 or Chapter 7 bankruptcy or otherwise ceases doing business. I was advised that the brokerage firm ordinarily transfers all customers' securities to a clearing firm. This person looked up E*Trade's clearing firm. It is called E*Trade Clearing, I was told. This person gave me that firm's telephone number (which I do not want to repeat, sorry). I called it.

3. So step three was my talking to an E*Trade individual who identified herself at the Chief Operating Officer's assistant. Bingo. But, despite my professional and calm and clear and simple question ("what can you tell me about the level of protection afforded to my securities and what is the basic procedure in the event of a bankruptcy filing or business cessation?"), this C.O.O.'s assistant declined to answer my question. I reiterated that I was not asking about E*Trade's current business/economic condition or its expectations and that I was only asking a basic procedural question, namely, "What if?" She refused to answer and she referred me to E*Trade's customer service.

4. Step 4 was my calling back that same number and the voicemail of some other E*Trade intercepted my call. I left a detailed message, making clear I simply wanted assurance regarding the safety of my securities. This person did not return my call (has still not returned my call, and it is now 5 hours since I placed it).

5. Step 5 was reading the C.O.O.'s letter issued at 10:04 A.M. today, which was about 20 minutes after I spoke to his assistant. The wording of that letter gave me no comfort.

6. Finally, I made copies of my most recent E*Trade statements and walked 8 blocks from my office to Fidelity Investments to initiate the ACAT transfer process. No panicking. No mattresses.

Why did I do this? It is not because I fear that my securities can disappear if E*Trade goes belly up (in addition to SPIC, E*Trade probably has its own separate insurance policies, but I do know that for certain). It is that I do not know how long my securities will be tied up in corporate and legal bureaucracy if that happens. I do not want my securities out of my control for a day, much less possibly weeks. If E*Trade ceases doing business as we know it, it will be flooded with transfer applications. There will be no "business in the normal course." The market might be declining while my assets are stuck in process. No thank you. I simply do not want to think about it or worry about it.

When a person dies with assets, do you think those assets just get lickety-split distributed out to the legatees? No. There is probate. There is process. There is voluminous paperwork. If a firm dies, is it any different? I do not know. I would rather not find out, thank you.

E*Trade would not tell me. It would not tell me anything. And I was talking to exactly the office and the officers who would know.

I think the E*Trade execs. (and I do sympathize with them) are in over their heads.

So I decided, "Time to move to a bigger gorilla." And I have. If Fidelity is not to my liking, I will return to E*Trade if it stabilizes.


Now this is a whole other kettle of fish. I bought 400 shares this morning, my first purchase of E*Trade shares (ETFC) at $4.49. This is a total crapshoot and should be viewed that way. If you have Las Vegas money, what the hell -- have some fun and see what happens. Because I submit to you, NOBODY knows the extent of the losses here.

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