Coughlin Stoia LLP yesterday filed a class-action suit against E*TRADE Financial Corp., accusing the company of violating the Securities Exchange Act of 1934. The firm is filing suit on behalf of E*TRADE’s investors who purchased common stock in the firm between Dec. 14, 2006 and Sept. 25, 2007. E*TRADE’s CEO Mitchell H. Caplan and Robert J. Simmons, CFO and principal accounting officer, were also named as individual defendants in the suit.

In its complaint, San Diego-based Coughlin Stoia alleged that E*TRADE failed to disclose that it was experiencing high delinquency rates in its mortgage and home equity portfolios.

Instead, the suit alleges that E*TRADE had an overvalued securities portfolio with mortgage-backed assets.

They also allege that the firm kept investors in the dark about the falling mortgage market, which made the value of E*TRADE’s shares plummet.

Furthermore, throughout August, while the credit markets crashed and E*TRADE’s stock price dropped, the company continued insisting that was financially sound and that concerns on its market capitalization were unfounded, the suit said.

The financial services company, which originated mortgages and subprime loans, pulled from its wholesale mortgage business on Sept. 17.

Coughlin Stoia Geller Rudman & Robbins LLP was founded by William S. Lerach, the famed class-action lawyer.

A spokeswoman from E*TRADE said that the company does not comment on pending litigation.