E*Trade is facing a class-action lawsuit based on charges that the company did not adequately warn investors about the negative oil prices risk and failed to display accurate prices.
20 August 2020 | AtoZ Markets – E*Trade is a financial services firm that provides brokerage and related product services. Founded in 1982 by William A. Porter and Bernard A. Newcomb, its headquarter is in New York, US. It offers trading services for financial assets such as stocks, futures contracts, mutual funds, options, bond investments, and exchange-traded funds.
Class Action Lawsuit Filed Against E*Trade for Negative Oil Prices
Oil prices fell to the negative territory in April for the first time in history due to the coronavirus pandemic. It has destroyed about one-third of global fuel demand since early March. As a result, E*Trade is facing a class-action lawsuit over platform outage. The plaintiffs are Benjamin Whiteside, Aziz Si Hadj Mohand, and Matthew Cheung, clients of the firm.
According to the plaintiffs, E*TRADE could not be properly or adequately equipped, both technically and systematically, to maintain access to the trading services.
When the oil price went negative, the E*TRADE platform showed and froze on the inaccurate positive price. This prevented its customers from exercising oil futures contracts through E*TRADE’s website, apps, and call centers. Plaintiffs claimed:
“Due solely to its own negligence and failure to maintain an adequate infrastructure, E*TRADE breached obligations owed to Plaintiffs and class members and caused them substantial losses. Its failures are all the more serious due to the magnitude of the Outage, the absence of alternative means for customers to protect their investments and the lack of communication and customer support.”
The plaintiffs claimed that prior to the COVID-19 pandemic, the idea that oil futures could move into the negative price range was a known possibility. But that potential has become a reality. Even so, E*Trade was unable to properly test the potential for negative oil futures on its online trading platform.
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