Need advice on e-trade dealings

[stevec6x6]

What is the name of your state (only U.S. law)? California
Hello. Need advice, not sure what to do.

I had exercised my stock options. Got the certificates and help onto them for over a year. I opened an e-trade account and sent in my certificates according to the instruction I received over the phone.

At the time, frankly I did not know what a restricted stock was ( i do now ) . I waited a while and finally saw my stock in my account. A few days went by and I decided to sell most of them. Clicked sell and the days market price and they went. A week or so later the proceeds were deposited into my account. I since transferred the money out into my personal back account.

A little while later I decided to sell the remaining shares I had. This time the system error came up stating I did not have enough un-restricted shares to sell. I called e-trade and they stated my shares were restricted and I had to submit a rule 144 research request to un-restrict them. The stock was going down so I just decided I would do that when i had more time, not thinking much of it.

Several months later I recieved an email stating i had to submit the request or the shares would be bought back. I submitted the paperwork via mail as requested.

A week or so later my account showed a purchase of the 3000 shares and now a negative balance. I reached a rep and resubmitted the paperwork. Nothing still. They called ME asking to submit it again. This went on about 5 times.

No I am receiving a letter stating money was mistakenly deposited into my account, and I need to pay them 85000 dollars. The buy back was 38k, now there is a mysterious deposit of 45k that they CANT explain to me. Meanwhile i got 3 more letters wanting this money. There is a number on the letter to call. I have called it several times, leaving a message. I never get a call back.

When I finally get someone to talk to, and receive the rule 144 paperwork, they tell me that the stock has had a 2-1 reverse split. So not only do I owe 38K dollars ( maybe 85k? not sure ), but now I have half as much stock to sell to cover the debt.

I feel I have been wronged. My broker, etrade , did not protect my interests. They should have made the stocks not sell able from day 1. They should have know about a reverse split .. THey are my stock brokers . Im just that baby on the tv comercial selling stock. I didnt know what to do....

I have been writing down all of my conversations with the etrade reps as well..

Any advice is appreciated. Thanks for reading.

 

[I_Got_Banned]

First a few questions:
1. Are you an affiliate of the stock issuer?
2. How did you acquire these stock options?
3. How many shares in total did you have?
4. When you received the stock certificate, did it have a “Restricted Stock” legend/stamp on it?
5. How much were the proceeds from the sale of the 3000 shares? How much did you withdraw out to your bank account?

The stock was going down so I just decided I would do that when i had more time, not thinking much of it.

Set aside the restricted stock problem, did you say “The stock was going down” so you decided to sit there & do nothing only until several months later & only because you received an e-mail that you even considered doing anything?

Did you say you feel you were wronged? I agree!

Several months later I recieved an email stating i had to submit the request or the shares would be bought back. I submitted the paperwork via mail as requested.

That statement there would tell me that your shares were not restricted. If they were, then your account would have showed a debit for 3000 shares a few days after your trade. E-Trade is not gonna cover you for 3000 shares & let you slide for “several months” when you had already pulled the cash out of the account.

This is assuming that you have a “Cash Account” as opposed to a “Margin Account”. But even in a Margin account & in light of the fact that your stock was going down, you had sold most of it. That Margin call would have hit you within a few days not “several months”.

No I am receiving a letter stating money was mistakenly deposited into my account

But before the money was deposited, the certificate was cleared through & the shares were credited to & showed up in your account. If the shares were restricted, whoever received that certificate should have held on to it until they got a hold of you.

I need to pay them 85000 dollars. The buy back was 38k, now there is a mysterious deposit of 45k that they CANT explain to me.

And according to those figures there is a discrepancy of $2000 that no one but me knows about!
$38,000 + $45,000 = $83000 not $85000
Somebody is smoking some good sh!t over there. In addition to all the screw ups they also entered the debit as $83000 instead of $38000. (I can’t believe they hired a dyslexic at a brokerage firm!! Does anyone have any doubt as to why financial doom is upon us?) So to bring back your account balance to the amount they say it should be at, they did a ledger credit for $45000 & that’s the deposit that they cannot explain to you.

they tell me that the stock has had a 2-1 reverse split. So not only do I owe 38K dollars ( maybe 85k? not sure ), but now I have half as much stock to sell to cover the debt.

It sounds to me you don’t understand unrestricted stock. Did you say you understood restricted stock?
A reverse split would be referred to as a 1 for 2 reverse split NOT a 2 for 1 reverse split.
When a stock goes through a 2 for 1 forward split (normally referred to simply as a “split”) the price is cut in half & the number of shares doubles. So when a stock goes through a reverse split, (which is allegedly the case here) the price doubles but the number of shares is cut in half. So “your” 3000 shares of stock (or whoever it belongs to at this point in time) & assuming it had a value of $1 per shares when the market closed the afternoon before the split (3000 shares X $1 per share = $3000), still had the same exact value when the market opened the next business day after the split took affect (1500 shares X $2 per share = $3000).

I feel I have been wronged.

WRONG! Unless you mean you wronged yourself.

My broker, etrade , did not protect my interests.

They did not protect your interest because you decided to protect it on your own when you opened up an online account. Did you read the disclosure that you agreed to before opening, funding & trading in your account?

They should have made the stocks not sell able from day 1.

That may be partially true however, when you opened up this account you assumed responsibility for your own actions. It says so in that discosure.

They should have know about a reverse split ..

And so did you! Your account, your investment, your money. & by the terms of the agreement/disclosure that you agreed to, it is your responsibility. To monitor it & keep yourself updated about the company’s news. A stock split does not happen over night. It is usually announced months in advance.

THey are my stock brokers

Wrong, you opted to be your own stock broker!

Im just that baby on the tv comercial selling stock.

Much funnier n T. V. I bet!!!

I didnt know what to do....

Then you should have done NOTHING until you found out what to do.

I have been writing down all of my conversations with the etrade reps as well..

Oh, don’t worry… My guess is that they probably have been making quite a few notations in your account as well.

Here’s a link to the Securities Brokerage Customer Agreement just in case you wanna go over a few things.
https://us.etrade.com/e/t/estation/help?id=1209031000

Let me point out a few areas that are related to your felling wronged & that your interests were not protected… etc.

4. (q) Disclaimer of Liability
I understand & agree that E*TRADE Securities & its affiliates will not be liable to me or to third parties, or have any responsibility whatsoever, for: (a) any Losses arising out of or relating to a cause over which E*TRADE Securities or its affiliates do not have direct control, including the failure of electronic or mechanical equipment or communication lines, telephone or other interconnect problems, unauthorized access, theft, operator errors, government restrictions, force majeure (e.g., earthquake, flood, severe or extraordinary weather conditions, natural disasters or other act of God, fire, acts of war, terrorist attacks, insurrection, riot, strikes, labor disputes or similar problems, accident, action of government, communications, system or power failures & equipment or software malfunction), exchange or market rulings or suspension of trading; or (b) any special, indirect, incidental or consequential damages (including lost profits, trading losses & damages) that I may incur in connection with my use of the Service provided by E*TRADE Securities under this Agreement.

5. E*TRADE SECURITIES BROKERAGE SERVICES

I ACKNOWLEDGE THAT I ALONE AM RESPONSIBLE FOR DETERMINING THE SUITABILITY OF MY INVESTMENT CHOICES IN LIGHT OF MY PARTICULAR CIRCUMSTANCES. I UNDERSTAND THAT E*TRADE SECURITIES ASSUMES NO RESPONSIBILITY FOR SUCH DETERMINATION. As a self-directed investor, I assume full responsibility for each & every transaction in or for my Account & for my own investment strategies & decisions. I understand & agree that E*TRADE Securities & its affiliates will have no liability whatsoever for the results of my investment strategies, transactions & decisions.

(a) No Advice
Unless otherwise specified in writing, E*TRADE Securities does not and will not provide me with any legal, tax, estate planning or accounting advice or advice regarding the suitability, profitability or appropriateness for me of any security, investment, financial product, investment strategy or other matter. Unless otherwise specified in writing, I acknowledge that E*TRADE Securities employees are not authorized to give any such advice, & I will neither solicit nor rely on any investment advice from any E*TRADE Securities employee. Unless otherwise specified, any information provided through the Service will not be used or considered by me as a recommendation that I buy, sell or hold a particular security or pursue any particular investment strategy. This information is not an offer, or a solicitation of an offer, to buy or sell securities on behalf of E*TRADE Securities. I also acknowledge that E*TRADE Securities neither assumes responsibility for nor guarantees the accuracy, currency, completeness or usefulness of information, commentary, recommendations, advice, investment ideas or other materials that may be accessed by me through the Service. This includes bulletin boards, message boards, chat services or other online conference or telecast by third party providers through E*TRADE Securities. If I choose to rely on such information, I do so solely at my own risk. I understand that the research, analysis, news or other information made available through the Service is not personalized or in any way tailored to reflect my personal financial circumstances or investment objectives & the securities & investment strategies discussed may not be suitable for me.

What you need to do is contact the Transfer Agent for the stock. Ask them if they have received the stock certificate, what the status of it is & (assuming it is restricted) what if anything you need to do to expedite having it reissued & returned to E-Trade without the restricted legend. The longer it takes for E-Trade to get their stock certificate in their hands, (and assuming the stock continues to drop in price) the more money you wil lose. A reverse stock split is not great news (I see it as a company‘s last ditch effort to keep their share price over the minimum required so as to remain listed on a major exchange)) the more money you will lose.

How do you find out who the Transfer Agent for the stock is?
Contact the company’s Investor Relations Dept should be able to tell you who their Transfer Agent is.

 

[stevec6x6]

thank you for the reply. I appreciate it.

the exact numbers here are ball park. I dont have the documents in front of me, hence the $2000 discrepancy.

For your questions
1. Are you an affiliate of the stock issuer?

I worked for the company that I purchased my stock options from. If that's what you mean, but no longer

2. How did you acquire these stock options?
Incentive Stock Option. Exercised when I left the company

3. How many shares in total did you have?
3541

4. When you received the stock certificate, did it have a “Restricted Stock” legend/stamp on it?

Yes ( and i was ignorant, i admit. I didnt know what that meant at the time, i should have researched it all better. )

5. How much were the proceeds from the sale of the 3000 shares? How much did you withdraw out to your bank account?

$97000 . 100% withdrew

I am sure my wording on the reverse split is wrong. Your explanation is correct.

I didnt really understand what it meant to have the stock restrictions removed at first. I had already sold the stock on the site. that's why I let it go for so long.

It was not a margin account. This was common stock I sent in. The "margin call" was indeed several months as I stated. It was a surprise to me for sure.

My ignorance aside, I sent in restricted stock certificates. It posted to my account for me to sell. I sold it. Months later, they want it back. The restricted legend in my online account did not show up till a week or so after I sold the majority of the stock. I was told to submit paperwork to have the restrictions removed. At the time, I thought this was for the remaining stock, I had already sold most of it. That is why I waited so long, not really in a hurry to sell the rest. I didn't realize that this was for ALL of the stock..

I wish I had never bought them...

I am told they are waiting for the restrictions to be lifted. How long does that take? I believe the fifth time I sent in the documents, they finally confirmed that they got them.

I will try and contact the transfer agent for etrade to get some status.

 

[I_Got_Banned]

thank you for the reply. I appreciate it.

Not a problem…

the exact numbers here are ball park. I dont have the documents in front of me, hence the $2000 discrepancy.

Gotcha… Forgive my anal retentive behavior. Still leaves the issue of that dyslexic employee over at E-Trade.

I worked for the company that I purchased my stock options from. If that's what you mean, but no longer

2. How did you acquire these stock options?
Incentive Stock Option. Exercised when I left the company

You “worked for the company as in you were an employee NOT an affiliate - (in layman’s terms) you were not one of the higher ups in the company, upper management/board of directors… etc? were you?

Did you exercise these stock options within 3 months after you were no longer employed by them.

If that is the case, and barring any other restrictions and/or requirements, then they do qualify as “Incentive Stock Options”.

3. How many shares in total did you have?
3541

If you were an affiliate the fact that this number is under 5000 shares = Good!

If you were not an affiliate then don’t worry about it.

5. How much were the proceeds from the sale of the 3000 shares? How much did you withdraw out to your bank account?

$97000 . 100% withdrew

Depending upon what the total value of these share at the time the company granted them to you, this might be a taxation issue (Incentive Stock Options versus Non-Qualified Stock Options OR better tax treatment versus worse tax treatment). Check with your tax advisor.

4. When you received the stock certificate, did it have a “Restricted Stock” legend/stamp on it?

Yes ( and i was ignorant, i admit. I didnt know what that meant at the time, i should have researched it all better. )

Don’t be so hard on yourself. Ignorant might be a bit too harsh….
Uninformed? Maybe…
Impatient & Excited? I know I would be…
Greedy? Hmmm…

OK, maybe “ignorant” fits OK… Just kidding!

I am sure my wording on the reverse split is wrong. Your explanation is correct.

I agree

I didnt really understand what it meant to have the stock restrictions removed at first. I had already sold the stock on the site. that's why I let it go for so long.

Yeah,… You sold your stock, pulled your cash… Who cares! Right?

It was not a margin account. This was common stock I sent in. The "margin call" was indeed several months as I stated. It was a surprise to me for sure.

Right… Common stock can be deposited, sold and even purchased in a margin account… Point is: THEY should have contacted you within days of the trade settlement date to tell you your shares were restricted and could not be sold. Heck, they should have never deposited those shares in the account if the certificate had the “restricted legend” on it. :rolleyes;

Also, a debit in a margin account will typically accrue interest… Although you do not have a margin account, I would have assumed that E-Trade would have debited your account for interest on the debit amount and since it will be MONTHS before this trade officially “settles‘…

My ignorance aside, I sent in restricted stock certificates.

STOP RIGHT THERE… that is where the RED FLAG should have gone up in your head. I can understand that you had no idea what “restricted stock” meant… But then again, you seem to have a full command of the English language and the word “restricted” is not that difficult to define. Especially considering the fact that you were looking at 3541 shares of stock which, at the time you made the decision to sell a big portion of them, were valued at approximately $114,492.33. I don’t care how rich you are. That is still A CHUNK OF CHANGE!

It posted to my account for me to sell. I sold it.

Personally, I would have called and chewed somebody’s head off… Then I would have ridiculed them for not knowing what on God’s green earth they are doing…

Months later, they want it back.

The "months later" is the part that blows my mind...

As for the "they want it back"... Come on, give me a break... This is not a roll of dimes that you deposited in your account!

Consider this: If you sent them the certificate and for whatever reason they sold it and yet never credited the proceeds to your account, would you not want it back?
A better question, would you have waited months for them to credit it to your account?
Get real!!!

The restricted legend in my online account did not show up till a week or so after I sold the majority of the stock.

Yeah, but prior to it appearing in your online account, the restriction existed on the certificate that you signed the back of and mailed to them (it is printed in RED INK, is it not?). Considering the type of account that you elected to open, you were responsible for understanding each and every thing you were doing OR suffer the consequences...

I was told to submit paperwork to have the restrictions removed.

Paperwork, which had you fulfilled your side of the agreement that you made with E-trade when you opened the account, you would have submitted along with the certificate.

At the time, I thought this was for the remaining stock

When you knew fully well that the entire 3541 shares were on a single certificate which carried a restricted legend; and a legend that made no mention of a specific number of shares…

I had already sold most of it.

And again… you should NOT have sold any of it not until you fully and completely understood the definition of “restricted” and done everything you can to unrestricted it.

That is why I waited so long, not really in a hurry to sell the rest.

Exactly what I eluded to earlier… You sold a good chunk of it… Pulled your cash… And only decided to get serious about looking into what the heck happened “several months later’ … None of which should have happened…

I didn't realize that this was for ALL of the stock..

I too would have assumed that it was only for the portion of the certificate that was covered by the RESTRICTED STOCK stamp! I am being sarcastic, obviously!

I wish I had never bought them...

You don‘t really mean that. If I were you, I’d wish I would have handled it right…
You may have grossed a bit less than $97,000 (assuming the stock would have traded down).… and even then, that would have been much better than nothing!
An expensive lesson learned!

I am told they are waiting for the restrictions to be lifted. How long does that take?

On the average and IIRC it shouldn’t be longer than 2 weeks. However, in this case, it depends upon a number of different factors which are primarily related to E-Trade’s inability to handle/process paper items (certificates, disclosure forms… or incoming mail for that matter) it might take 3 to 4 weeks. Keep in mind that the decision to remove the restriction is NOT up to the Transfer Agent; he is merely contacting the company and they will decide if and when the restriction can be removed.
Hopefully you didn’t burn any bridges there!!!

I will try and contact the transfer agent for etrade to get some status.

It might serve to benefit you if you do so… keep in mind that the Transfer Agent, and considering the fact that the certificate was sent to them by E-Trade, they might claim that they can only disclose that info to E-Trade… But you might be able to convince them “to give you an idea” based on the fact that it “WAS” originally your certificate…

Let me also remind you that it is almost tax time… Considering the big mess that this matter has created, I would urge you to contact a qualified tax professional soon.

Lastly, let me apologize for seeming a bit offensive I may have been at times… Frustrated as I may be, I have only lost a bit of time… Albeit doing something I enjoy. (And no, being “offensive” is NOT the part that I enjoy…)

 

[stevec6x6]

Yes, I was an employee. Just a regular guy doing desktop tech support.

I purchased the options "before" i left the company, actually. About a week ..

I just got off an email with etrade, they confirmed my paperwork was sent to the T/A on 2/13. I sent that in on 1/20.... (originally on 10/05, which they lost, and 3 more times subsequently )

Interestingly enough, I just had my tax appointment. I was prepared to pay the tax on the initial sales figure, I just wasn't prepared to have to also poney up the money for this stock buyback deal. Plus, it looks like i may have to pay tax on money I don't even get to keep. Then pay more tax for 2009 when I can sell the "new" shares, to cover the debit in my account.

And I got married too ( probably should have waited till this year, up 2 tax brackets for 08)


Sooo... I am guessing the gist is I should have known better as to what I was doing.

My issue is how they have handled this transaction. Had they got to me very quickly, this would have been resolved. It took almost a month for the money to hit that account, you would think that some system would have seen the discrepancy. Not to mention the months now of back and forth trying to get the restrictions lifted on the stock they bought back. From my point of view, this just seems incompetent.

Would I even have a leg to stand on in a lawsuit or arbitration ?


Thanks again for all your time here. I do appreciate it.
You have helped me separate some emotion from the actual facts of the matter, which seem to be I'm screwed.

 

[I_Got_Banned]

Yes, I was an employee. Just a regular guy doing desktop tech support.

I purchased the options "before" i left the company, actually. About a week ..

OK, so a lower tax liability…

I just got off an email with etrade, they confirmed my paperwork was sent to the T/A on 2/13.

Now call the T/A and see if/when they've received it, what they did with it and how long they anticipate it will take before E-Trade received it back!

I sent that in on 1/20.... (originally on 10/05, which they lost, and 3 more times subsequently )

Again, I dont know the details of that...
Where it was sent?
How was it sent?
Signature required?
Fed-Ex?....
Heck I would have driven to the nearest E-Trade and hand delivered it to one of their branches!!! But that’s me.

Interestingly enough, I just had my tax appointment. I was prepared to pay the tax on the initial sales figure, I just wasn't prepared to have to also poney up the money for this stock buyback deal.

The question is, are you gonna hold the newly acquired shares for over a year (so that its a long term gain or loss) or are you gonna hold them for under a year (so that its a short term gain or loss)?
I would actively monitor that stock especially in the couple of weeks prior to the one year anniversary of when they were bought back on your behalf.
Your tax advisor will have more on that

Plus, it looks like i may have to pay tax on money I don't even get to keep.

And since when does the IRS let you have your money first? They always get their cut before you see any of it!

And I got married too ( probably should have waited till this year, up 2 tax brackets for 08)

WHAT??? What the heck did you do that for???

J/K

probably should have waited till this year,

Oh, OK, pretend it would have been up to you! We’ll pretend to believe you!!!

Sooo... I am guessing the gist is I should have known better as to what I was doing.

Agreed!

My issue is how they have handled this transaction.

I disagree…. I think your issue should be how YOU handled this situation!

Had they got to me very quickly, this would have been resolved.

I disagree again! Had you not rushed things… Had you done your research, cleared your stock, not only would THIS have been resolved, THIS would have NEVER HAPPENED!

It took almost a month for the money to hit that account, you would think that some system would have seen the discrepancy

I thought you said

A week or so later the proceeds were deposited into my account.

At any rate...

you would think that some system would have seen the discrepancy.

Well, the “system” does what intelligent human beings program it to do… But if these intelligent human beings don’t know about “restricted stock” then the system is not gonna recognize a problem it was not told to look out for…

you would think that some system would have seen the discrepancy.

Well, the “system” does what intelligent human beings program it to do… But if these intelligent human beings don’t know about “restricted stock” then the system is not gonna recognize a problem it was not told to look out for…

Not to mention the months now of back and forth trying to get the restrictions lifted on the stock they bought back

Shame on them for not letting you dive in head first when you knew you had no clue what you’re doing! All when you opened up the type of account where you, albeit indirectly, refused anyone’s help.

you would think that some system would have seen the discrepancy.

Well, the “system” does what intelligent human beings program it to do… But if these intelligent human beings don’t know about “restricted stock” then the system is not gonna recognize a problem it was not told to look out for…

Not to mention the months now of back and forth trying to get the restrictions lifted on the stock they bought back.

Again, play the scenario I suggested in my last post. They sold the stock without being authorized to do so… and pulled the money out of your account… Several months later, you’re still waiting for them to put the money back but they haven’t!!!

From my point of view, this just seems incompetent.

One thing that you and E-Trade agree upon… Meaning, from their point of view, and with all due respect, this all seems incompetent!
You have to face the fact that you initiated a process that you had no authority initiating. Yes they slacked and snoozed… and slacked again. I am not gonna suggest that they slacked out of the goodness of their hearts but honestly, if they wanted to:
They could charge you interest on the outstanding amount for the entire period since the debit appeared in your account;
They could have bought the stock back much earlier than they did;
They could taken you to arbitration…
What’s the common denominator between all those things?
The common denominator is “you getting screwed somehow“! Whether it will turn out that you get screwed now versus by what else they could have done is yet to be known. The fact remains, you screwed up just as royally as they did. You can deny it all you want. I’ll stop there…
And to suggest that you can mail them documents five times and only to have them lose them each and every time, is in a very direct way, hypocritical. I have never personally dealt with E-Trade but to suggest that they can be so incompetent so as to lose that paperwork five times would suggest that they should just close up and go home instead of having [/I]the fiduciary and or custodial responsibility for “4.5 million customer accounts” with a “Total cash and customer Deposits of $32.3 billion dollars!”
(Source: E-Trade - See this link: https://investor.etrade.com/releasedetail.cfm?ReleaseID=361813 )

Would I even have a leg to stand on in a lawsuit or arbitration ?

Whether you do or not, I couldn’t tell you… As I said before I am neither an attorney nor am I a tax advisor. I would certainly recommend that you discuss this matter with a Securities Law attorney. There were mistakes made on both ends and I couldn’t even begin to suggest who will come out ahead when all is said and done.
What I can tell you (without you even mentioning it) is that you have also signed an arbitration agreement when you opened up that account. How do I know… Every account agreement for any brokerage firm in the United Stated includes the “if we disagree, we go to arbitration” clause.
In fact it might be a separate document on its own.

Thanks again for all your time here. I do appreciate it.

And I appreciate your open mindedness and your accepting my opinions for just what they are… Opinions. Once again, I have to extend an apology for any seemingly disrespectful comments or connotations in any of my posts. I am not here to disrespect you nor anyone else.
I just feel that your are still in denial as far as your contribution to this mess.
One thing you GOTTA DO.. Not because I said so, but for your own… That one thing is: Face reality!!!

You have helped me separate some emotion from the actual facts of the matter, which seem to be I'm screwed.

OK, another disclosure that I left out… I am not a psycho therapist either…
When it comes to the emotional feelings, you did that on your own. Maybe I held your eyes open for you a little longer than what you could have managed on your own! That’s all.