Colorado Securities Commissioner Fred Joseph announced that the Securities Division Staff has filed charges against New York based broker‐dealer E*Trade Securities, LLC alleging that E*Trade Securities falsely represented auction rate securities as liquid, short‐term investments to Colorado investors without discussing the risks.
Colorado Securities Commissioner Fred Joseph announced that the Securities Division Staff has filed charges against New York based broker‐dealer E*Trade Securities, LLC alleging that E*Trade Securities falsely represented auction rate securities as liquid, short‐term investments to Colorado investors without discussing the risks.
Colorado Securities Commissioner Fred Joseph announced that the Securities Division Staff has filed charges against New York based broker‐dealer E*Trade Securities, LLC alleging that E*Trade Securities falsely represented auction rate securities as liquid, short‐term investments to Colorado investors without discussing the risks.
NOTICE OF DUTY TO ANSWER, NOTICE TO SET, NOTICE OF HEARING, AND
NOTICE OF CHARGES, AND NOTICE TO ENGAGE IN ALTERNATIVE
DISPUTE RESOLUTION IN THE MATTER OF E*TRADE SECURITIES LLC, Respondent. TO: E*Trade Securities LLC 135 E. 57 th Street, 14 th Floor New York, NY 10022 NOTICE OF DUTY TO ANSWER YOU ARE HEREBY NOTIFIED that, pursuant to § 24-4-105(2)(b), C.R.S. (2009), you are required to file a written answer to the following Notice of Charges set forth below with the Office of Administrative Courts, 633 Seventeenth Street, Suite 1300, Denver, Colorado 80202, within thirty (30) days after the mailing date of this Notice of Duty to Answer, Notice to Set, Notice of Hearing, and Notice of Charges. You must also mail a copy of such answer to the Colorado Division of Securities’ (“Division”) attorneys of record in this matter, Sueanna P. Johnson and Alexander C. Reinhardt, Assistant Attorneys General, Office of the Attorney General, 1525 Sherman Street, 7 th Floor, Denver, Colorado 80203, within the same thirty-day time period. If you fail to file your written answer within thirty days as set forth above, then an order entering a default decision may be issued against you You are further advised that issuance of a default decision may grant the relief requested in the Notice of Charges, or such other relief or penalties that may be provided for by law, or both. NOTICE TO SET YOU ARE HEREBY NOTIFIED that the undersigned attorney or a representative of the Commissioner, will appear on August 17, 2010 at 11:00 a.m. in the Office of the Chief Administrative Law Judge, Office of Administrative Courts, 633 Seventeenth Street, Suite NOTICE OF HEARING YOU ARE HEREBY NOTIFIED that, pursuant to § 11-51-606(1), 24-4-104 and 24- 4-105, C,R.S. (2009), a hearing will be held before an authorized administrative law judge at a date, time and location to be detennined pursuant to the above Notice to Set. At the hearing, testimony will be taken and other evidence will be received by the administrative law judge for the purpose of determining whether any of the sanctions set forth in § 11-51- 4 10(1), C.R,S. (2009) should be imposed upon you, including but not limited to the revocation of your license as a broker-dealer for violations of 11-51-410 and 501, C.R.S. (2009). YOU ARE FURTHER NOTIFIED that at the hearing in this matter you shall have the right to appear in person and/or by legal counsel, to present evidence on your own behalf, to cross-examine any witnesses, and to rebut any evidence presented. You may also have subpoenas issued on your behalf upon request to the administrative law judge. A copy of the General Rules of Procedure may be obtained at the Division of Administrative Hearings or by visiting their Internet web site at: http://www.colorado.gov/dpaloac/gen_rules.htm. RELEVANT LEGAL AUTHORITY The following statutes and rules are relevant to the allegations and charges made in the Notice of Charges: § 11-51-410. Denial, suspension, or revocation. (1) The securities commissioner may by order deny an application for a license, suspend or revoke a license, censure a licensed person, limit or impose conditions on the securities activities that a licensed person may conduct in this state, and bar a person from association with any licensed broker-dealer, investment adviser, or federal covered adviser in the conduct of its business in this state in such capacities, and for such period as the order specifies. These sanctions may be imposed only if the securities commissioner makes a finding, in addition to the findings required by section 11-51-704(2), that the applicant or licensed person or, in the case of a broker-dealer or investment adviser, a partner, officer, director, person occupying a similar status or performing similar functions, or person directly or indirectly controlling the broker dealer or investment adviser: 2 (i) Has failed to supervise, with a view to preventing violations of this article, another person who is subject to the.person’s supervision and who commits such a violation (g) Has willfully engaged in a course of conduct involving the violation of one or more rules made by the securities commissioner that prohibit unfair and dishonest dealings by a broker-dealer or sales representative § 11-51-501. Fraud and other prohibited conduct. (1) It is unlawful for any person, in connection with the offer, sale, or purchase of any security, directly or indirectly: (a) To employ any device, scheme, or artifice to defraud; (b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading; or (c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person. 3 CCR 704-1, Rule 51-4.7. Unfair and Dishonest Dealings. The following practices shall be deemed to be “unfair and dishonest dealings” for purposes of section 1 l-51-410(l)(g), C.R.S.: B. Recommending to a customer the purchase, sale or exchange of any security without reasonable grounds for believing that the recommendation is suitable for such customer upon the basis of the information furnished by the customer after reasonable inquiry concerning the customer’s investment objectives, financial situation and needs, and any other information known by the broker-dealer or sales representative; NOTICE OF CHARGES YOU ARE HEREBY NOTIFIED of the following allegations: 3 New York. At all times relevant to this action, E*Trade has been a licensed broker-dealer in the state of Colorado. 2. Pursuant to § 11-51-410(1) and 703(1), C.R.S. (2009), the Securities Commissioner has jurisdiction over Respondent and the subject matter of this proceeding. STATEMENT OF FACTS Summary of the Allegations 3. This is an action to revoke, suspend, or otherwise impose conditions on the broker-dealer license of E*Trade based upon the fraudulent sale of certain “auction rate securities” (“Auction Rate Securities” or ‘ARS”) in and from Colorado to Colorado investors in violation of the anti-fraud provisions of the Colorado Securities Act. See § 11-51-501, C.R.S. 4. ETrade sold ARS to Colorado investors, since at least 2005 and continuing until the ARS market collapsed completely in February of 2008. In selling ARS, E*Trade sales representatives told investors that ARS was a short-term, cash-equivalent, liquid investment. Contrary to these representations, the ARS market depends on a complicated bidding process called a “Dutch auction.” In the event that a Dutch auction fails because there are not enough buyers to bid on the sale of ARS at a certain interest rate, then the ARS become illiquid, long term investments until they can be sold at a future auction. E*Trade did not disclose to investors the complicated Dutch auction process, that Dutch auctions could fail and had failed in the past, and that such a failure could result in an illiquid long term investment. In many instances, E*Trade ARS investors did not even know they were invested in ARS. And, in truth and material fact and contrary to the statements E*Trade made, E*Trade knew the risk that ARS auctions could fail when E*Trade sold ARS to Colorado investors. Due to the widespread Dutch auction failures in February 2008, Colorado investors cannot liquidate their ARS holdings. The Securities 5. Auction Rate Securities include a family of investments such as Municipal Auction Preferred Stock and Auction Preferred Stock, as well as Auction Rate Certificates, also referred to as Auction Rate Debt Securities. Auction Rate Securities are generally long 4 other reset periods exist). The interest rate is reset through a bidding process known as a “Dutch auction.” 7. A Dutch auction is a process whereby sellers state the amount of Auction Rate Securities that they wish to sell, and bidders state the amount of Auction Rate Securities they wish to purchase and the minimum interest rate they are willing to accept. The purchase bids are ranked, from the lowest to the highest, according to the minimum interest rate each bidder is willing to accept. The lowest interest rate required to sell all of the Auction Rate Securities at auction, known as the “clearing rate,” becomes the rate paid to all holders of that particular bond until the next auction. This process is repeated every 7, 28 or 35 day cycle, depending upon the reset period specified. 8. The success or failure of a given Dutch auction depends upon whether or not there are enough buyers for every auction rate being offered for sale. If an auction is successful, investments in ARS remain liquid because investors can sell their ARS at the auction. However, if the action fails, investors are required to hold all or some of their Auction Rate Securities until the next successful auction. Thus, the liquidity of an Auction Rate Security relies upon the successful operation of the Dutch auction. 9. Broker-dealers frequently acted as auction dealers for the Auction Rate Securities that they had underwritten and they typically received a percentage of the total sale for facilitating the auction. The auction dealer solicited the bid and submitted the order directly to an auction agent. Because the broker-dealer acted as the auction dealer for the ARS that they had underwritten, the auction dealer would learn ahead of time whether the ARS auction would be successful, and what the clearing rate would be for that issue of ARS. Historically, broker-dealers acting as the auction dealer have stepped in during the case of auction failure to place a “cover” or “support” bid on their own behalf, and would carry the ARS on the firm’s own proprietary account to prevent auction failures. Broker dealers, therefore, often helped sustain the market for ARS because they stood to profit from the continuing viability of the ARS Dutch auction process. 10. An ARS issuer should provide prospectuses to investors with each new issue of ARS. However, secondary ARS buyers that purchase at Dutch auction do not receive prospectuses. 11. The prospectus typically states that, in the event of an auction failure, the issuer of the Auction Rate Security pays a default interest rate until the next successful 5 return or interest for the investor holding the ARS. 12. At its peak, the Auction Rate Securities market was a multi-billion dollar nationwide market based in part upon representations that they were a highly liquid “cash equivalent” that allowed investors to divest their holdings as needed. Investors were led to believe that they needed only wait until the next regularly scheduled auction to liquidate their holdings. Issuers were motivated to sell ARS because could receive cash at a relatively low interest rate, and investors were motivated to purchase ARS because it was understood to be a liquid investment that was relatively safe and yielded a higher interest rate than other liquid investments that paid interest, such as money market accounts. Historically, mostly institutional investors purchased ARS. The Failure of the Auction Rate Securities Market 13. In February 2008, the Auction Rate Securities market seized, stranding tens of thousands of investors in billions of dollars worth of long term investments. The freezing of the Auction Rate Market was the result of repeated failure of Dutch auction process and the refusal of broker-dealers that had previously perpetuated the illusion of an always- functioning market to intervene. 14. The systemic auction failures starting in 2008 did not represent the first example of auction failures. As early as 1987 and 1988, Dutch auctions for ARS had failed for long term bonds issued by MCorp and Kroger. In 2006, the Securities and Exchange Commission issued a Cease and Desist Order imposing sanctions upon numerous large broker-dealers, including Bear, Stearns & Co, Citigroup, Goldman Sachs, J.P. Morgan Securities, Inc., Lehman Brothers, and numerous others in case number 3-123 10, In the Matter ofBear, Stearns & Co. Inc. et al, (the “SEC C&D”). The SEC C&D in particular found that the named broker-dealers conduct in the Dutch auction process included various examples of interference in the ARS Dutch auction market, including (but not limited to) bidding to prevent failed auctions. 15. The interference of broker-dealers in the Dutch auction market played a significant role in the illusion of a smooth-functioning market. Because the auction dealer knew in advance of a potential failure, the auction dealer could step in to prevent the auction failure. When broker-dealers stepped in to prevent auction failure, they typically placed a cover bid and then carried the investment on their proprietary accounts. The willingness of 6 s, sales representatives told retail investors that ARS was a short-term, liquid investment. 17. In the latter part of 2007, several of the underwriters of ARS offerings stopped submitting cover bids in some types of ARS auctions. This resulted in a significant number of failed ARS auctions by November 2007. 18. In February of 2008, the market for Auction Rate Securities which had been sustained in part by the broker-dealers and auction dealers collapsed entirely. Combined with ongoing market conditions, the result generally was a freeze in the ARS auction market, and a loss of the only secondary market for liquidating the investments. Retail investors who held Auction Rate Securities were unable to liquidate their holdings and were left receiving the default rate of interest, which in certain instances was as low as 0%. E*Trade’s sale of Auction Rate Securities 19. Although E*Trade markets itself as a low-cost option for self-directed investing, F-Trade also offers financial advisory services and sells certain financial products, including ARS. 20. E*Trade registered sales representatives routinely referred customers to E*Trade financial advisors for investment advice, which included the offer and sale of ARS. 21. To complete a sale of ARS, E*Trade financial advisors are believed to have submitted a customer’s order to the E*Trade fixed income desk where the order was reviewed and transmitted to the E*Trade ARS distributor for execution. 22. E*Trade sold ARS to Colorado investors, beginning in at least 2005 and continuing through at least 2007. E*Trade representatives told Colorado investors that ARS was a safe, liquid investment, comparable to an investment in a money market account. E*Trade did not explain the Dutch auction process to investors, that Dutch auctions could fail and had failed in the past, and that in the event that ARS could not be sold at Dutch auction that investors would hold an illiquid long-term investment. Investors did not receive a prospectus or other written disclosures, and some were not even aware that they had purchased ARS. 7 submitting cover bids to sustain the Dutch auction process, and the 2006 SEC C&D which addressed broker-dealer interference with the Dutch Auction process, among other things. Furthermore, in October 2007, an E*Trade Retail Fixed Income Manager sent an email referencing an article that detailed the possible collapse of the ARS market. E*Trade continued to sell ARS to Colorado investors while knowing the risk of failure of the Dutch auctions, and did not fully disclose that risk and other material facts to investors. 24. E*Trade sold approximately $15 million of ARS to approximately 40 Colorado investors, many of whom have been unable to redeem their ARS holdings since February of 2008 because of the Dutch auction failures in the ARS markets. 25. The Auction Rate Securities sold to investors are “securities” as contemplated by § 11-51-201(17), C.R.S., in that they are at least “bonds,” “evidence of indebtedness,” and “investment contracts.” Material Misrepresentations and Omissions and Fraud in the Acts, Practices, or Course of Business 26. In connection with the offer, purchase and sale of securities, Respondent E*Trade, either directly or indirectly, made oral or written statements to investors, in and from the State of Colorado, including, but not limited to, the following: a. That Auction Rate Securities were a fully liquid cash equivalent similar to a money market. b. That Auction Rate Securities positions could be liquidated at regularly scheduled periods such as 7, 28, or 35 days. c. That Auction Rate Securities were a safe short-term investment. 27. In truth and material fact, and contrary to the statements made by Respondent E*Trade: a. Auction Rate Securities are only liquid if there are sufficient participants in the market ready, willing and able to purchase the security at the next regularly scheduled auction. b. That failure of an auction would extend the period necessary for an investor to wait to liquidate their position in an Auction Rate Security, and that 8 28. In connection with the offer and sale of securities, Respondent, directly or indirectly, failed to disclose material facts to investors, including, but not limited to, the following: a. That investors were purchasing auction rate securities and the risks inherent in such purchases. b. That the ARS auctions had, in the past, been supported by broker-dealers acting as the auction dealer. c. That a withdrawal of support by the auction dealer from the ARS auction market would result in the elimination of the secondary market for Auction Rate Securities, thus severely restricting their liquidity. d. The risk of auction failure. f. That the liquidity of the investments depended upon a complicated Dutch auction process. 29. Based on the information currently available to the Commissioner, the following sub-paragraphs detail the known scheme to defraud investors and the acts, practices and course of business engaged in by the Respondent to defraud investors. a. E*Trade Representative Stuart Allen Torrey sold $150,000 of ARS to Colorado investor J.O. on November 20, 2007. Torrey described the investment to J.O. as a “cash equivalent” and “short term corporate paper” that could be sold on a weekly basis. J.O. purchased another $100,000 in ARS the following month, resulting in a total of $250,000 in ARS holdings. Neither Torrey nor any other E*Trade representative told J.O. that he was purchasing ARS, and that ARS actually consisted of long term investments that could become illiquid if the Dutch auction process failed. J.O. never received a prospectus or other written disclosures. These omissions made E*Trade’s statements regarding the investment’s liquidity misleading. J.O. still holds $250,000 of ARS. b. E*Trade representative Geoff Greenfield sold Colorado investor D.W. approximately $4 million worth of ARS in January of 2007. Greenfield told D.W. that ARS were AAA rated, cash equivalent investments that could be liquidated at auction on a weekly basis. Greenfield also told 9 made statements regarding the liquidity of ARS misleading. D.W. still has approximately $1.5 million in ARS holdings. c. Greenfield or other E*Trade representatives sold approximately $1.4 million worth of ARS to Colorado investor G.H. on October 18, 2007, and 1.2 million to G.H. on December 3, 2007. E*Trade representatives told Gil. that ARS were safe, liquid, cash-equivalent investments. Neither Greenfield nor any E*Trade representative explained the Dutch auction process to G.H., that the process could fail and had failed in the past, and that ARS were actually long term investments that relied on the Dutch auction process for their liquidity. G.H. did not receive a prospectus. These omissions made E*Trade’s statements regarding the liquidity of ARS misleading. G.H. still owns approximately $1 million in ARS. d. Colorado investor H.K., for the benefit of his son’s college trust fund account, purchased $100,000 worth of ARS in late 2005 from an E*Trade representative. E*Trade told H.K. that ARS was short-term, safe, and liquid investment that could be sold every two weeks. E*Trade representatives did not explain the Dutch auction process to D.W., that the process could fail and had failed in the past, and that ARS were actually long term investments that relied on the Dutch auction process for their liquidity. H.K. did not receive a prospectus. These omissions made E*Trade’s statements regarding the liquidity of ARS misleading. $100,000 worth of ARS remains illiquid in the college trust fund account. E*Trade’s Failure to Supervise 30. E*Trade associated with numerous financial advisors that engaged in the sale of Auction Rate Securities, including Greenfield and Torrey, who are licensed sales representatives in Colorado. As the broker-dealer employing financial advisors making offers and sales of securities in and from Colorado, E*Trade is required by law to adequately and properly supervise their conduct with a view to preventing violations. Supervision is an essential function of the broker-dealer. Every broker-dealer is required to establish, implement, and maintain a set of written supervisory procedures and a system for implementing written supervisory procedures which may be reasonably expected to prevent and detect the violations described herein. Establishment of policies and procedures alone is 10 representatives, including Greenfield and Torrey, were providing full disclosure of the material facts required to be disclosed in connection with the offer and sale of Auction Rate Securities. 32. E*Trade failed to adequately and properly supervise the conduct of its registered sales representatives, including Greenfield and Torrey in connection with the offer and sale of Auction Rate Securities, with a view to preventing violations by the registered sales representatives. Respondent E*Trade directly or indirectly failed to reasonably supervise, with a view to preventing violations of the Act, the activities of its retail sales representatives, or failed to adopt and implement supervisory procedures that could reasonably be expected to prevent and detect violations of the Act. This lack of supervision or apparent pervasive ignorance of or circumvention of supervisory policies and procedures has caused or substantially contributed to the occurrence of the violations described herein. FIRST CLAIM Securities Fraud ( 11-51-501, C.R.S.) 33. Paragraphs 1 through 32 are incorporated herein by reference. 34. By engaging in the conduct set forth above, in connection with the offer, sale, or purchase of securities in Colorado, Respondent E*Trade, diect1y, or indirectly: a. employed a device, scheme, or artifice to defraud clients or prospective clients; b. made written and oral untrue statements of material fact or omitted to state material facts necessary to make the statements made, in light of the circumstances under which they were made, not misleading; or c. engaged in acts, practices or courses of business which operated and would operate as a fraud and deceit on investors all in violation of 11-51-501(1), C.R.S. 35. The conduct of Respondent constitutes a violation of 1 1-51-410(1)(b), C.R.S. under the Colorado Securities Act, and constitutes grounds for the imposition of sanctions against E*Trade pursuant to § 11-51-410(1), C.R.S., including suspension or revocation of their broker-dealer license pursuant to § 11-51-410, C.R.S. In addition, 11 ( 11—51—410(1)(i)) 36. Paragraphs 1 through 35 are incorporated herein by reference. 37. During all times relevant to this Notice of Charges, E*Trade was responsible for the supervision of its financial advisors acting as sales representatives in the state of Colorado, including Greenfield and Torrey. 38. Respondent E*Trade failed to reasonably supervise its financial advisors acting as sales representatives, including Greenfield and Torrey, with a view to preventing violations of the Act. As a result of the Respondent’s failure to reasonably supervise its financial advisors acting as sales representatives, E*Trade’s financial advisors acting as sales representatives sold securities in violation of the anti-fraud provisions of the Colorado Securities Act, § 11-51-501(1), C.R.S. 39. The conduct of Respondent E*Trade constitutes a violation of 11-5 1- 4 10(1)(i), C.R.S. under the Colorado Securities Act, and constitutes grounds for the imposition of sanctions against E*Trade pursuant to § 11-51-410(1), C.R.S., including suspension or revocation of E*Trade’s broker-dealer license pursuant to § 11-51-410, C.R.S. In addition, pursuant to § 11-51-704(2), C.R.S., these sanctions are necessary and appropriate in the public interest and consistent with the purposes and provisions of the Act. THIRD CLAIM Unfair and Dishonest Dealings Unsuitability ( 11-51-410(1)(g)) 40. Paragraphs 1 through 39 are incorporated herein by reference. 41. Respondent E*Trade’s sales representatives systematically recommended the purchase, sale or exchange of a security without reasonable grounds for believing that the recommendation was suitable for the investor based on the information furnished by the investor after reasonable inquiry concerning the customer’s investment objectives, financial situation, and needs in violation of Colorado Securities Commissioner’s Rule 51 -4.7.B (unsuitability). 12 WHEREFORE, the Staff respectfully requests that an Administrative Law Judge enter an initial decision revoking, suspending or otherwise imposing conditions upon the broker-dealer license of E*Trade pursuant to § 11-51-410, C.R.S., and for such other and further relief as the Administrative Law Judge deems just and proper. DATED July 2 1st, 2010. STAFF OF THE DIVISION OF JOHN W. SUTHERS SECURITIES ATTORNEY GENERAL ST E OF C LORADO (j GE LDR.IOME Alexander b. Reinhardt, 34970* Deputy Securities Commissioner Assistant Attorney General 1560 Broadway, Suite 900 Sueanna P. Johnson, 34840* Denver, Colorado 80202 Assistant Attorney General Tel: (303) 894-2320 Attorneys for the Staff of the Fax: (303) 861-2126 Division of Securities 1525 Sherman Street, Floor Denver, Colorado 80203 Telephone: (303) 866-5255/5576 Facsimile: (303) 866-5395 *counsel of record CASE NAME: Financial Corporation CASE NUMBER: XY-2010- This agency disciplinary proceeding will be scheduled for hearing before an administrative law judge of the Office of Administrative Courts (the “OAC”). The OAC encourages parties to use alternative methods of dispute resolution and offers to the agency and respondents the opportunity to engage in mediation. Mediation is a process in which a neutral third party meets with the parties to assist them in reaching a negotiated settlement of the disciplinary proceeding. If the parties are able to reach an agreement in this way, they will control the outcome of the disciplinary case by agreeing to a solution, rather than having a solution imposed upon them by an administrative law judge after a hearing. In mediation, the mediator facilitates communication between the parties in a private, confidential and informal meeting. If a party has an attorney, the attorney will participate. The mediator has no decision-making authority; no settlement or solution to the disciplinary case will be achieved unless both parties are in agreement. A mediator can often help the parties generate creative options to resolve the disciplinary case, even though those options would not be available if the case proceeded to a hearing before an administrative law judge. Mediators may be able to assist the parties in reaching a settlement even where the parties’ prior, unassisted negotiations have failed to result in an agreement. If both parties agree to mediate this disciplinary case they may notify the OAC, which will assign an administrative law judge or other qualified mediator to conduct the mediation. A mediator acts in a completely confidential manner and has no contact with the judge to whom the case is assigned for hearing. The parties should indicate whether they wish to engage in mediation by completing the information on the reverse side of this form. The respondent should return the completed form to the OAC, along with the answer to the Notice of Charges or Formal Complaint. 14 Administrative Courts. [JThe agency in the disciplinary proceeding described on the front of this form chooses not to engage in mediation at this time. (Signature of Agency Official or (Date) Assistant Attorney General) RESPONDENT’S ELECTION TO MEDIATE (CHECK THE APPROPRIATE BOX) LiThe respondent named below believes that mediation of this dispute is appropriate and elects to engage in mediation at the Office of Administrative Courts. Li The respondent named below chooses not to engage in mediation at this time. Name of Respondent (Print or Type) (Signature of Respondent or (Date) Respondent’s Attorney) THE RESPONDENT MUST RETURN THIS FORM TO THE OFFICE OF ADMINISTRATIVE COURTS, ALONG WITH THE ANSWER TO THE NOTICE OF CHARGES OR FORMAL COMPLAINT, EVEN IF THE RESPONDENT HAS CHOSEN NOT TO ENGAGE IN MEDIATION. THE ADDRESS OF THE OFFICE OF ADMINISTRATIVE COURTS IS 633 17TH STREET, SUITE 1300, DENVER, CO 80202. A COPY OF THIS FORM AND THE ANSWER OF THE RESPONDENT SHOULD ALSO BE SENT TO THE ATTORNEY GENERAL. 15 same in the United States mail, first-class postage prepaid, at Denver, Colorado, this 21st day of July 2010 addressed as follows: E*Trade Securities, LLC 135 E. 57 th Street, 14 th Floor New York, NY 10022 () L4_ r 7 16