eTrade 2005 Annual Report Download - page 192

Table of Contents
Regulatory Matters
The securities and banking industries are subject to extensive regulation under Federal, state and applicable international laws. As a
result, the Company is required to comply with many complex laws and rules and its ability to so comply is dependent in part on the
establishment and maintenance of a qualified compliance system. From time to time, the Company has been threatened with, or named
as a defendant in, lawsuits, arbitrations and administrative claims involving securities, banking and other matters. The Company is also
subject to periodic regulatory audits and inspections. Compliance and trading problems that are reported to regulators, such as the
SEC, the NYSE, the NASD or the OTS by dissatisfied customers or others are investigated by such regulators, and may, if pursued,
result in formal claims being filed against the Company by customers and/or disciplinary action being taken against the Company by
regulators. The regulators may also initiate investigations and take disciplinary action against the Company or its employees. Any
such claims or disciplinary actions that are decided against the Company could have a material impact on the financial results of the
Company or any of its subsidiaries.
Insurance Matters
The Company maintains insurance coverage that management believes is reasonable and prudent. The principal insurance coverage it
maintains covers commercial general liability, property damage, hardware/software damage, cyber liability, directors and officers,
employment practices liability, certain criminal acts against the Company and errors and omissions. The Company believes that such
insurance coverage is adequate for the purpose of its business. The Company’s ability to maintain this level of insurance coverage in
the future, however, is subject to the availability of affordable insurance in the marketplace.
Commitments—Loans
In the normal course of business, the Bank makes various commitments to extend credit and incur contingent liabilities that are not
reflected in the consolidated balance sheets. The Bank had the following mortgage loan commitments (in thousands):
December31, 2005
Fixed Rate
VariableRate
Total
Purchase loans
$
316,040
$
46,163
$
362,203
Originate loans
$
94,512
$
17,940
$
112,452
Sell loans
$
24,294
$
10,793
$
35,087
Significant changes in the economy or interest rate influence the impact that these commitments and contingencies have on the
Company in the future.
At December31, 2005, the Bank had commitments to purchase $0.9 billion and sell $1.0 billion in securities. In addition, the Bank had
approximately $2.3 billion of certificates of deposit scheduled to mature in less than one year and $6.2billion of unfunded commitments
to extend credit.
Guarantees
The Bank provides guarantees to investors purchasing mortgage loans, which are considered standard representations and warranties
within the mortgage industry. The primary guarantees are as follows:
•
The mortgage and the mortgage note have been duly executed and each is the legal, valid and binding obligation of the Bank,
enforceable in accordance with its terms. The mortgage has been duly acknowledged and recorded and is valid. The mortgage
and the mortgage note are not subject to any right of rescission, set-off, counterclaim or defense, including, without limitation,
the defense of usury, and no such right of rescission, set-off, counterclaim or defense has been asserted with respect thereto. If
these
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