1015780--2/24/2010--E_TRADE_FINANCIAL

related topics

{debt, indebtedness, cash}

{loan, real, estate}

{stock, price, operating}

{tax, income, asset}

{stock, price, share}

{regulation, change, law}

{competitive, industry, competition}

{system, service, information}

{personnel, key, retain}

{condition, economic, financial}

{operation, international, foreign}

{provision, law, control}

{control, financial, internal}

{capital, credit, financial}

Risks Relating to the Nature and Operation of Our Business We have incurred significant losses and cannot assure that we will be profitable. We will continue to experience losses in our mortgage loan portfolio. We could experience significant losses on other securities held on the balance sheet. Our chief executive officer stepped down at the end of 2009 as planned. If we are unable to hire a qualified replacement in a timely manner, our ability to execute our business plan could be harmed. Losses of customers and assets could destabilize the Company or result in lower revenues in future periods. We have a large amount of debt. We are subject to investigations and lawsuits as a result of our losses from mortgage loans and asset-backed securities. Many of our competitors have greater financial, technical, marketing and other resources. The continuing turmoil in the global financial markets could reduce trade volumes and margin borrowing and increase our dependence on our more active customers who receive lower pricing. We depend on payments from our subsidiaries. We rely heavily on technology, and technology can be subject to interruption and instability. Vulnerability of our customers computers could lead to significant losses related to identity theft or other fraud and harm our reputation and financial performance. Downturns in the securities markets increase the credit risk associated with margin lending or stock loan transactions. We may be unsuccessful in managing the effects of changes in interest rates and the enterprise interest-earning assets in our portfolio. If we do not successfully manage consolidation opportunities, we could be at a competitive disadvantage. Risks associated with principal trading transactions could result in trading losses. Reduced spreads in securities pricing, levels of trading activity and trading through market makers could harm our market maker business. Advisory services subject us to additional risks. Our international operations subject us to additional risks and regulation, which could impair our business growth. We have a significant deferred tax asset and cannot assure it will be fully realized. As a result of the Public Equity Offering, the Debt Exchange and related transactions, we believe that we have recently experienced an ownership change for tax purposes that could cause us to permanently lose a significant portion of our U.S. federal and state deferred tax assets. Risks Relating to the Regulation of Our Business We are subject to extensive government regulation, including banking and securities rules and regulations, which could restrict our business practices. The OTS may request that we raise additional equity to support E*TRADE Bank or to further reduce debt. If we are unable to do so, we could face negative regulatory actions. Any such actions could have a material negative effect on our business. If we fail to comply with applicable securities and banking laws, rules and regulations, either domestically or internationally, we could be subject to disciplinary actions, damages, penalties or restrictions that could significantly harm our business. If we do not maintain the capital levels required by regulators, we may be fined or even forced out of business. As a non-grandfathered savings and loan holding company, we are subject to regulations that could restrict our ability to take advantage of certain business opportunities. Risks Relating to Owning Our Stock We are substantially restricted by the terms of our corporate debt. The value of our common stock may be diluted if we need additional funds in the future or engage in debt-for-equity exchanges in the future. Citadel is our largest stockholder and debtholder, with approximately 9.8% of our common stock as of December 31, 2009, or approximately 34% as converted, as of December 31, 2009. Accordingly, Citadel s interests may conflict with the interests of other stockholders. Citadel is a substantial holder of our common stock and has not entered into any contractual arrangements to protect the interests of other stockholders. The market price of our common stock may continue to be volatile. We have various mechanisms in place that may discourage takeover attempts. We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.

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1015780--2/24/2010--E_TRADE_FINANCIAL_CORP