Updated from Nov. 9

E*Trade ( ETFC) slumped early Monday after the company said it expected added writedowns and disclosed a probe by the Securities and Exchange Commission.

Shares of the online broker were plunging 29% to $6.12 in premarket trading.

The company said late Friday that it has seen continued declines in the fair value of its $3 billion asset-backed securities portfolio, predominantly within ABS collateralized debt obligations and second-lien securities. The total exposure to those instruments as of Sept. 30 was approximately $450 million, including about $50 million of AAA-rated asset-backed CDOs that were downgraded to below investment grade.

E*Trade expects the decreases in fair value to result in further securities writedowns in the fourth quarter, but the company believes it will remain well-capitalized based on regulatory standards.

"Management believes the additional deterioration observed since September 30 will likely result in writedowns that exceed the previous expectations included in the Company's 2007 earnings outlook updated on October 17, and investors should no longer expect these earnings levels to be achieved," E*Trade said in a statement. "Actual securities-related losses will depend on future market developments, including the potential for future downgrades by rating agencies, which are extremely difficult to predict in this environment. Accordingly, management believes it is no longer beneficial to provide earnings expectations for the remainder of the year."

Also, the company said the SEC started an informal inquiry on Oct. 17 of its loan and securities portfolios. E*Trade is cooperating with the investigation.

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