eTrade 2000 Annual Report Download - page 54

approach to securities trading and banking and they require extensive marketing and sales efforts to educate prospective customers
regarding their uses and benefits. Consumers who trade with traditional brokerage firms, or even discount brokers, may be reluctant or
slow to change to obtaining brokerage services over the Internet. Also, concerns about security and privacy on the Internet may hinder
the growth of online investing and banking, which could have a material adverse effect on our business, financial condition and
operating results.
If we are not able to effectively integrate and assimilate ETFC’s operations with our own, the profitability of ETFC will be
diminished
On January 12, 2000, we acquired ETFC. ETFC, through its subsidiary E*TRADE Bank, is a provider of Internet banking services.
This represents a new line of business for us. No assurance can be given that we will be able to effectively manage ETFC’ s operations
or integrate them with our own in order to realize synergies from the
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acquisition. The Bank holds a loan portfolio consisting primarily of one- to four-family residential loans. A critical component of the
banking industry is the ability to accurately assess credit risk and establish corresponding loan loss reserves. We are dependent upon
ETFC’ s management and employees to advise us in this area. In addition, we may experience difficulty in assimilating ETFC products
and services with our own and we may not be able to integrate successfully the employees of ETFC into our organization. These
difficulties may be exacerbated by the geographical distance between our various locations and ETFC’ s Virginia location. If we fail to
successfully integrate ETFC’ s operations with our own, our operating results and business could be adversely affected.
If our international efforts are not successful, our business growth will be harmed and our resources will not have been used
efficiently
One component of our strategy is a planned increase in efforts to attract more international customers. To date, we have limited
experience in providing brokerage services internationally, and ETFC has had only limited experience providing banking services to
customers outside the United States. There can be no assurance that our international licensees or subsidiaries will be able to market
our branded services and products successfully in international markets.
In order to expand our services globally, we must comply with the regulatory controls of each specific country in which we conduct
business. Our international expansion could be limited by the compliance requirements of other regulatory jurisdictions. We intend to
rely primarily on local third parties and our subsidiaries for regulatory compliance in foreign jurisdictions.
In addition, there are certain risks inherent in doing business in international markets, particularly in the heavily regulated brokerage
and banking industries, such as:
unexpected changes in regulatory requirements, tariffs and other trade barriers;
difficulties in staffing and managing foreign operations;
the level of investor interest in cross-border trading;
authentication of online customers;
increased regulation of the use of customer data;
political instability;
fluctuations in currency exchange rates;
reduced protection for intellectual property rights in some countries;
seasonal reductions in business activity during the summer months in Europe and certain other parts of the world;
the level of adoption of the Internet in international markets; and
potentially adverse tax consequences.
2002. EDGAR Online, Inc.