E*Trade Financial to settle class action for $79 million

Posted on: January 5th, 2012 by Steve Larson

E*Trade Financial and its insurers have agreed in principle to pay $79 million to settle class action lawsuits brought against the online brokerage as a result of losses in its mortgage and home equity loans portfolio in 2007.  E*Trade was sued by investors who alleged the company violated securities law and breached its fiduciary duty to shareholders in relation to the massive losses it suffered following the collapse of the subprime mortgage market.

The company said the losses incurred were caused by a “worldwide economic catastrophe” and that the corporation did not break the law.  It has stuck by this position.

E*Trade’s portion of the settlement payment is around $10.75 million and will be reflected as an expense in the current quarter.

The agreement in principle requires court approval to become final.  A definitive agreement is expected in the first quarter of 2012.