eTrade 2003 Annual Report Download - page 44

Table of Contents
Index to Financial Statements
dealers and institutional investors can direct their limit orders. This allows broker-dealers and institutional investors to avoid directing their
trades through market makers. As a result, Dempsey may experience a reduction in its flow of limit orders.
If we do not successfully manage consolidation opportunities, we could be at a competitive disadvantage
There has been significant consolidation in the online financial services industry over the last several years, and the consolidation is likely
to continue in the future. Should we fail to take advantage of viable consolidation opportunities or if we overextend our efforts by acquiring
businesses that we are unable to integrate or manage properly, we could be placed at a competitive disadvantage. Acquisitions entail numerous
risks including retaining or hiring skilled personnel, integrating acquired operations, products and personnel and the diversion of management
attention from other business concerns. In addition, there can be no assurance that we will realize a positive return on any acquisition or that
future acquisitions will not be dilutive to earnings.
We rely heavily on technology to deliver products and services
Disruptions to or instability of our technology, including an actual or perceived breach of the security of our technology, could harm our
business and our reputation.
Our international efforts subject us to additional risks and regulation, which could impair our business growth
One component of our strategy has been an effort to build an international business. We have established certain joint venture and/or
licensee relationships. We have limited control over the management and direction of these venture partners and/or licensees, and their action
or inaction, including their failure to follow proper practices with respect to regulatory compliance and/or corporate governance, could harm
our operations and/or our reputation.
Risks Relating to the Regulation of our Business
We are subject to extensive government regulation, including banking and securities rules and regulations, which could restrict our
business practices
The securities and banking industries are subject to extensive regulation. All of our broker-dealer subsidiaries have to comply with many
laws and rules, including rules relating to possession and control of customer funds and securities, margin lending and execution and settlement
of transactions. We are also subject to additional laws and rules as a result of our specialist and market maker operations in Dempsey. In
addition, to the extent that, now or in the future, we solicit orders from our customers or make investment recommendations (or are deemed to
have done so), or offer products and services, such as investing in futures, that are not suitable for all investors, we would become subject to
additional rules and regulations governing, among other things, sales practices and the suitability of recommendations to customers.
Similarly, E*TRADE Financial Corporation, E*TRADE Re, LLC and ETBH, as savings and loan holding companies, and E*TRADE
Bank, as a Federally chartered savings bank, are subject to extensive regulation, supervision and examination by the OTS, and, in the case of
the Bank, the FDIC. Such regulation covers all banking business, including lending practices, safeguarding deposits, capital structure,
recordkeeping, transactions with affiliates and conduct and qualifications of personnel.
If we fail to comply with applicable securities, banking and insurance laws, rules and regulations, we could be subject to disciplinary
actions, damages, penalties or restrictions that could significantly harm our business
The SEC, NYSE, NASD, Commodity Futures Trading Commission or other self-regulatory organizations and state securities
commissions can, among other things, censure, fine, issue cease-and-desist orders or suspend
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