E*TRADE Forms Asset Management Unit, Plans Index Fund

E*TRADE Group Inc. Tuesday announced
plans to offer its own family of mutual funds and money market offerings.

The deal comes just after E*TRADE gained approval from the Securities & Exchange Commission and the
National Association of Securities Dealers to enter the asset management
business.

E*TRADE will launch the E*TRADE S&P 500 Index Fund next week and also plans
to offer more index funds over the next 12 to 18 months. Customers will be
able to invest in the funds through E*TRADE’s mutual fund center.

The new funds will be offered by E*TRADE Asset Management, an E*TRADE
subsidiary.

“Adding asset management to our portfolio of businesses is another step in
E*TRADE’s strategy to diversify its revenue stream by leveraging its
electronic business model and its growing base of online investors. At the
same time, it allows us to develop new investment offerings that address
the needs of existing and prospective customers,” said Kathy Levinson,
E*TRADE’s president and chief operating officer.

While the online brokerage continues to add customers, it has also faced a
barrage of complaints from users who say they have frequently been unable
to access the system. Those complaints prompted New York Attorney General Eliot
Spitzer to launch an inquiry
into whether false claims and delays have caused investors to lose money.

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