The Colorado Division of Securities filed charges against E*Trade Securities, alleging that the New York-based broker falsely represented auction rate securities.

The false representations that the securities were liquid, short-term investments gave Colorado investors a “false sense of security,” said Commissioner Fred Joseph.

In the complaint, the division alleges that E*Trade violated the Colorado Securities act by making false representations to investors, failing to adequately supervise its sales force and engaging in unfair and dishonest dealings.

Action rate securities are long-term bonds that rely on the successful operation of a periodic auction for short term liquidity. E*Trade brokers are accused of “repeatedly and persistently” misrepresenting the liquidity risks” in the auction rate securities.

The complaint is now before an administrative law judge and seeks to suspend E*Trade’s license to operate in Colorado. No hearing date has been scheduled.