E-trade accord could refund up to $20 million

The state reaches a final settlement over the sale of ‘auctionrate securities.’

California regulators have announced a final settlement in a dispute with Etrade Securities that could refund up to $20 million to Golden State investors.

The California Department of Corporations late Friday said it closed an investigation that alleged Etrade misrepresented socalled “auction-rate securities” to buyers as “safe, cashequivalent products, even though the products faced increasing liquidity risk.”

E-trade also will pay nearly $1.1million in administrative penalties to the state and agreed to abide by a legal order prohibiting violations of California securities laws, including not supervising brokers selling auction-rate securities.

The agreement was part of a global settlement in October between E-trade and a number of states that could result in as much as $100 million worth of refunds for people who still own auctionrate securities they purchased from E-trade.

The Department of Corporations said an auctionrate security is “a non-conventional, fixed-income, long-term security, whose dividend rates are reset periodically at auctions at set weekly or monthly intervals.”

In a related settlement announced Friday, state Controller John Chiang said he reached agreement with Prudential Insurance Co. of America that may return up to $20 million to the families of deceased life insurance policyholders in California.