eTrade 2010 Annual Report Download - page 161

As of December 31, 2010, there was $11.9 million of total unrecognized compensation cost related to
non-vested awards. This cost is expected to be recognized over a weighted-average period of 1.4 years. The total
fair value of restricted shares and restricted stock units vested was $20.9 million, $8.1 million and $5.6 million
for the years ended December 31, 2010, 2009 and 2008, respectively.
401(k) Plan
The Company has a 401(k) salary deferral program for eligible employees who have met certain service
requirements. The Company matches certain employee contributions; additional contributions to this plan are at
the discretion of the Company. Total contribution expense under this plan was $4.1 million, $4.1 million and
$4.6 million for the years ended December 31, 2010, 2009 and 2008, respectively.
NOTE 20—REGULATORY REQUIREMENTS
Registered Broker-Dealers
The Company’s U.S. broker-dealer subsidiaries are subject to the Uniform Net Capital Rule (the “Rule”)
under the Securities Exchange Act of 1934 administered by the SEC and FINRA, which requires the maintenance
of minimum net capital. The minimum net capital requirements can be met under either the Aggregate
Indebtedness method or the Alternative method. Under the Aggregate Indebtedness method, a broker-dealer is
required to maintain minimum net capital of the greater of 6
2
⁄ 3 % of its aggregate indebtedness, as defined, or a
minimum dollar amount. Under the Alternative method, a broker-dealer is required to maintain net capital equal
to the greater of $250,000 or 2% of aggregate debit balances arising from customer transactions. The method
used depends on the individual U.S. broker-dealer subsidiary. The Company’s international broker-dealer
subsidiaries, located in Europe and Asia, are subject to capital requirements determined by their respective
regulators.
As of December 31, 2010, all of the Company’s broker-dealer subsidiaries met minimum net capital
requirements. Total required net capital was $0.1 billion at December 31, 2010. In addition, the Company’s
broker-dealer subsidiaries had excess net capital of $0.6 billion at December 31, 2010.
The table below summarizes the minimum excess capital requirements for the Company’s broker-dealer
subsidiaries (dollars in thousands):
December 31, 2010
Required Net
Capital
Net
Capital
Excess Net
Capital
E*TRADE Clearing LLC(1) $110,685 $535,801 $425,116
E*TRADE Securities LLC(1) 250 158,886 158,636
E*TRADE Capital Markets, LLC(2) 1,000 44,285 43,285
International broker-dealers 8,640 30,832 22,192
Total $120,575 $769,804 $649,229
(1) Elected to use the Alternative method to compute net capital.
(2) Elected to use the Aggregate Indebtedness method to compute net capital.
Banking
E*TRADE Bank is subject to various regulatory capital requirements administered by federal banking
agencies. Failure to meet minimum capital requirements can trigger certain mandatory and possibly additional
discretionary actions by regulators that, if undertaken, could have a direct material effect on E*TRADE Bank’s
financial condition and results of operations. Under capital adequacy guidelines and the regulatory framework for
158