Welcome to the club, E*Trade Financial Corp.  The firm reported in its annual report filing that, on 2/9, it received a Wells notice from FINRA related to the purchase of auction-rate securities (ARS's) by customers of one of its subsidiaries.  E*Trade is the latest online brokerage to be called upon by regulators to make whole those investors who purchased ARS's prior to the collapse of its market in early 2008.

In a note to clients, Sandler O'Neill analyst Richard Repetto said he anticipates that any settlement entered into by E*Trade would be "small or immaterial and manageable."  E*Trade said the total amount of ARS's held by its customers was $138mn as of 12/31/10. 

    Other Online Broker-Dealers.   Last spring, 2 other online B/D's were similarly probed by regulators.  TD Ameritrade agreed to repurchase $305mn in ARS's from clients.  Charles Schwab received an SEC Wells notice, as well as a civil complaint from NY Attorney General in 2009.  Schwab filed a motion to dismiss the AG's case and told FINRA it believes the enforcement charges are unwarranted.   [WSJournal, 2/24;  Fox Business, 2/23]