eTrade 2011 Annual Report Download - page 8

COMPETITION
The online financial services market continues to evolve rapidly and we expect it to remain highly
competitive. Our trading and investing segment competes with full commission brokerage firms, discount
brokerage firms, online brokerage firms, Internet banks, traditional “brick & mortar” retail banks and thrifts and
market making firms. Some of these competitors provide Internet trading and banking services, investment
advisor services, touchtone telephone and voice response banking services, electronic bill payment services and a
host of other financial products. Our balance sheet management segment competes with investment banking
firms and other users of market liquidity, in addition to the competitors above, in its quest for the least expensive
source of funding.
The financial services industry has become more concentrated as companies involved in a broad range of
financial services have been acquired, merged or have declared bankruptcy. During the past four years, this trend
accelerated considerably as a significant number of U.S. financial institutions consolidated, were forced to
merge, or received substantial government assistance. We believe we can continue to attract customers by
appealing to retail investors by providing them with easy to use and innovative financial products and services.
We also face competition in attracting and retaining qualified employees. Our ability to compete effectively
in financial services will depend upon our ability to attract new employees and retain and motivate our existing
employees while efficiently managing compensation related costs.
REGULATION
Our business is subject to regulation by U.S. federal and state regulatory and self-regulatory agencies and
securities exchanges and by various non-U.S. governmental agencies or regulatory or self-regulatory bodies,
securities exchanges and central banks, each of which has been charged with the protection of the financial
markets and the protection of the interests of those participating in those markets.
Our regulators, rulemaking agencies and primary securities exchanges in the U.S. include, among others, the
Securities and Exchange Commission (“SEC”), the Financial Industry Regulatory Authority (“FINRA”), the
New York Stock Exchange (“NYSE”), the National Association of Securities Dealers Automated Quotations
(“NASDAQ”), the FDIC, the Federal Reserve, the Municipal Securities Rulemaking Board, the Office of the
Comptroller of the Currency (“OCC”) and the Consumer Financial Protection Bureau (“CFPB”).
Both our brokerage and banking entities are subject to the Bank Secrecy Act, as amended by the USA
PATRIOT ACT of 2001 (“BSA/USA PATRIOT Act”), which contains anti-money laundering and financial
transparency laws. In order to comply with the BSA/USA PATRIOT Act, we have established an Anti-Money
Laundering (“AML”) unit which is responsible for developing and implementing enterprise-wide programs for
compliance with the various anti-money laundering and counter-terrorist financing laws and regulations.
For customer privacy and information security, under the rules of the Gramm-Leach-Bliley Act of 1999, our
brokerage and banking entities are required to disclose their privacy policies and practices related to sharing
customer information with affiliates and non-affiliates. The rules also give customers the ability to “optout” of
having non-public information disclosed to third parties or receiving marketing solicitations from affiliates and
non-affiliates based on non-public information received from our brokerage and banking entities.
Brokerage Regulation
Our broker-dealers are registered with the SEC and are subject to regulation by the SEC and by self-regulatory
organizations, such as FINRA and the securities exchanges of which each is a member, as well as various state
regulators. Such regulation covers all aspects of the brokerage business, including, but not limited to, client
protection, net capital requirements, required books and records, safekeeping of funds and securities, trading,
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