will pay a second $1 million penalty for its failure to comply with anti-money laundering rules.
The Financial Industry Regulatory Authority, or FINRA, imposed the fine against two of the brokerage firm's subsidiaries for "failing to establish and implement" an anti-money laundering program "that could reasonably be expected to detect and cause the reporting of suspicious securities transactions," the agency said.
had fined E*Trade for similar issues in July.
E*Trade consented to the fine, but did not admit to or deny the charges. FINRA said its sanctions took into account E*Trade's "prompt corrective action" to remediate its systems, including automating certain functions and expanding staff and third-party vendors to monitor suspicious activity.
"As acknowledged in the FINRA order, E*Trade upgraded its systems to provide an automated method to monitor for this particular activity, and those systems have been in place for over a year," the company said in a statement.
FINRA requires brokerage firms to establish and implement procedures that address a number of areas, including monitoring the trading in customer accounts as well as the flow of money into and out of these accounts. Online firms such as E*Trade specifically have been instructed to "consider conducting computerized surveillance of account activity to detect suspicious transactions and activity," it says.
FINRA, the largest non-governmental regulator for securities firms, formed in 2007 through the consolidation of NASD and NYSE member regulations, found that between Jan.1, 2003, and May 31, 2007, E*Trade did not have an adequate automated anti-money-laundering program. Instead the firm relied on analysts and other employees to "manually" monitor for and detect suspicious trading activity without providing them with sufficient automated tools, the organization said.
E*Trade's shares have been swaying as investors worry that the New York firm won't receive approval for a federal investment via the Troubled Assets Relief Program, or TARP. E*Trade filed an application for $800 million in funds in early November and has said publicly that it is "optimistic" of a TARP approval but still no approval has been made.
Rumors have floated that the government does not want to be seen as bailing out E*Trade's largest investor,
, given the large hedge fund's own troubles this year.
Shares were most recently rising 3.5% to $1.19 on Friday.