Is E*TRADE regulated?
Yes, it is regulated by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA).
Is E*TRADE safe?
To be certain, we highly advise that you check two facts:
- how you are protected if something goes wrong
- what the background of the broker is
How you are protected
This is important for you because the investor protection amount and the regulator differ from country to country. At E*TRADE, this is not an issue as all customers are handled by E*TRADE Securities LLC and are covered by the US investor protection scheme called SIPC.
The SIPC investor protection scheme protects against the loss of cash and securities in case the broker goes bust. The limit of SIPC protection is $500,000, which includes a $250,000 limit for cash. This is substantially higher than what most other investor protection schemes provide.
Not all investments are protected by SIPC. In general, SIPC covers notes, stocks, bonds, mutual funds, and other investment company shares, and other registered securities. It does not cover instruments such as unregistered investment contracts, unregistered limited partnerships, fixed annuity contracts, currency, and interests in gold, silver, or other commodity futures contracts or commodity options.
E*TRADE does not provide negative balance protection.
Background
E*TRADE was established in 1982. The longer track record a broker has, the more proof we have that it has successfully survived previous financial crises.
E*TRADE Bank, an affiliated company of E*TRADE Securities LLC under E*Trade Financial Corporation, has a banking license, and as such, it is subject to tougher regulation than brokers. In February 2020, E*TRADE was acquired by investment giant Morgan Stanley, under which it will continue its brokerage services.
E*TRADE Financial Corporation is listed on the NASDAQ, which is a big plus for safety as E*TRADE releases financial statements regularly and transparently.
Having a banking license, being listed on a stock exchange, providing financial statements, and being regulated by a top-tier regulator are all great signs for E*TRADE’s safety.