NASDR is an independent subsidiary of the National Association for Securitiesa Dealers (NASD), which was set up by the US government to regulate the securities industry. The particular investigation into E-Trade’s activities revealed that the company had misleadingly claimed that a mutual fund introduced in 1999 had been “ranked by Morningstar as the lowest cost tech index fund”. The fund had not been ranked by Morningstar and so the statement included in several advertisements was false.
In addition, E-Trade was found to have carried out two direct mailing marketing campaigns in breach of NASDR regulations and its compliance and supervisory procedures for advertising activities failed to comply with NASDR standards.
E-Trade has neither admitted nor denied the regulatory body’s findings, but the following statement from the company has been reported by News.com:
“E-Trade’s advertising review and approval procedures, along with its supervisory system and written supervisory procedures, have been enhanced to further ensure compliance with NASD rules concerning advertisements and sales literature.”