eTrade 2005 Annual Report Download - page 26

Table of Contents
In September 2001, the Company engaged in certain stock loan transactions that resulted in litigation between the Company and
certain counterparties to the transactions including Nomura Securities, Inc. and certain of its affiliates (“Nomura”). In the lawsuits,
Nomura sought approximately $10.0 million in damages and asserted the right to keep an additional $5.0 million, plus interest,
unspecified punitive damages, attorney fees, and other relief from the Company for conversion and breach of contract. The Company
asserted claims and defenses against Nomura relating to the same amount and alleged,
inter alia
, that Nomura, among others,
participated in a stock lending fraud and violated federal and state securities laws among other allegations. The Company sought,
among other things, compensatory damages for all expenses and losses that it had incurred to date. On December5, 2005, the Company
entered into an agreement with Nomura and its subsidiaries and affiliates to settle the lawsuits pending between the parties in New
York and Minnesota.Pursuant to that agreement, Nomura, without admission of liability, agreed to pay, and has paid,$35.0 millionto the
Company to resolve these disputes;the Company and Nomura further agreed to dismiss their claims against each other. With the
resolution of these matters, this litigation will no longer be included in our disclosures.
An unfavorable outcome in any matter that is not covered by insurance could have a material adverse effect on our business, financial
condition, results of operations and cash flows. In addition, even if the ultimate outcomes are resolved in our favor, the defense of
such litigation could entail considerable cost and the diversion of the efforts of management, either of which could have a material
adverse effect on our results of operations. In addition to the matters described above, the Company is subject to various legal
proceedings and claims that arise in the normal course of business, which we believe will not have a material adverse effect on our
financial position, results of operations or cash flows.
We maintain insurance coverage that we believe is reasonable and prudent. The principal insurance coverage we maintain 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. We believe that such insurance coverage is adequate for
the purpose of our business. Our ability to maintain this level of insurance coverage in the future, however, is subject to the
availability of affordable insurance in the marketplace.
ITEM4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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2006. EDGAR Online, Inc.