[ by Howard Haykin ]

E*Trade Financial Corp. reported in its quarterly Form 8K that it has implemented a review of its order-handling practices and pricing for order flow to ensure customers are getting "best execution."  The review was prompted by questions raised by a member of its Board of Director, and was initiated by Chairman Frank Petrilli and the firm's General Counsel raised questions, according to a regulatory filing.

According to the regulatory filing submitted late Thursday with the SEC, E*Trade noted that the review is "being conducted by separate firms of outside broker-dealer and bank regulatory counsel."

So far, the reviewers have offered recommendation that "would improve upon our standards, processes and compliance procedures."  The firm agrees with the findings and has begun "implementing them."

Purpose of Review. The review, which continues, seeks to ensure that E*Trade Securities is providing "best execution" on customer orders and is "dealing appropriately with its affiliate under applicable regulatory standards." 

E*Trade will keep "applicable regulatory agencies" informed and would cooperate with any investigations by "bank and federal and state securities regulators" - knowing that any such investigations could lead to disciplinary actions against the firm.   E*Trade further acknowledges that any such customer claims against the broker-dealer could "adversely affect our market making and trade execution businesses."

Ongoing 5-Year Struggle. For nearly 5 years, E*Trade has been struggling:

• to recover from bad mortgages and bad bets made on the U.S. housing market by the affiliated banking unit. 
• to find a new CEO to replace Steven Freiberg who was fired in August.  
• As the stock traded near multiyear lows, E*Trade has been 'hounded' and prodded by its largest shareholder, hedge fund giant Citadel LLC after its decided not to pursue a potential sale.

For further details, go to:  [ WSJournal, 11/2/12].