E*Trade Enters the Research Business

E*Trade Group Inc., continuing its push to become something more than just an
online brokerage, is expanding into the somewhat troubled world of
proprietary research and stock analysis.

Menlo Park, Calif.-based E*Trade named Martin Evans as
its director and head of global research and said it has hired a team of
research analysts from Credit Lyonnais.

Evans will be responsible for establishing institutional proprietary research
“with an emphasis on objective and unbiased analysis in a broad range of key
sectors,” the company said.

Unbiased, of course, will be key given the ongoing investigations of various
investment banks and their analysts.

New York Attorney General Eliot Spitzer has subpoenaed most of Wall Street’s
biggest investment banks in a widening probe of research objectivity – i.e.,
were investors misled by analysts in order to inflate revenues on the
investment side of the business. The Securities and Exchange Commission and a
multi-state task force, co-headed by Spitzer, also are looking into the

Last month Spitzer
obtained a court order
requiring investment firm Merrill Lynch to
disclose to investors the nature of its relationship with investment banking
clients and provide more context for its stock ratings.

Nevertheless, E*Trade is confident that it has made the right decision and
said that its move is expected to “drive revenue growth through cross-selling
and up-selling opportunities to existing customers and attract new clients.”

“Our clients’ need for independent research has become more apparent as
investment banks are faced with conflicts of interest arising from the way
equity research is produced,” said Jarrett Lilien, chief brokerage officer at
E*Trade. “By establishing a proprietary, unbiased research offer, E*Trade
Financial reinforces its commitment in delivering best-of-breed products to
its clients.”

Starting in London, Evans will manage a team of equity research analysts to
cover key European sectors with plans to expand the offering globally,
E*Trade said. The company will introduce the offering to U.S. institutional
clients in the third quarter of 2002.

Evans had been head of European Research at Credit Lyonnais in London where
he managed the research operations.

The team of analysts will join the company by end of May and Evans will join
them within six months. The development of institutional proprietary research
follows the recent launch of E*Trade’s market making service in the UK.

E*Trade has been in expansion mode for some time; last month it
snapped up privately held Tradescape
for $100 million in stock and bought
online trading assets from A.B. Watley for another $5 million.

In January the company launched its own
radio content syndication service
. That same month it
launched a planning and advice product
that includes financial
forecasting tools and the ability to consult directly with personal financial
planners through Ernst & Young.

E*Trade has said it expects to earn 45 cents to 55 cents per share from
ongoing operations in 2002.

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