Aug. 9 (Bloomberg) — E*Trade Financial Corp., the brokerage thatcame under pressure from its biggest shareholder to seek buyers,ousted Chief Executive Officer Steven J. Freiberg and said itsboard is looking for a new leader.

The shares rose 6 percent to $8.50 as of 9:45 a.m. in New York.Freiberg, 55, was the company's third CEO in four years. ChairmanFrank J. Petrilli hold the post while the company seeks a permanentreplacement, E*Trade said today in a statement. A board committeewhich includes the head of its biggest shareholder, Citadel LLC'sCEO Ken Griffin, will lead the search, the company said.

“The company recently implemented a refined business strategy,centered on strengthening the firm's financial position,” Petrillisaid today in the statement. “The board believes it is anappropriate time to transition the role of CEO to a new leader toguide the company through the next phase of its evolution.”

Citadel last year called on E*Trade to hire a bank to reviewstrategic alternatives and take immediate action to maximizeshareholder value after “catastrophic losses” that had driven theshares down 97 percent since 2007. E*Trade in November rejectedputting the company up for sale and Petrilli joined the board inJanuary.

Strategic Review

E*Trade Chief Financial Officer Matthew Audette said inNovember that the company never contacted potential buyers as partof its strategic review. E*Trade saw “no reason to proceed down thepath” of starting a sales process, he said, citing economicuncertainty and the interest-rate and credit environment inexplaining why the company didn't reach out to potentialsuitors.

Citadel, a Chicago-based hedge fund, invested $2.55billion in E*Trade in November 2007 to help the company survivemortgage losses. The retail broker posted four years of lossesthrough 2010, partly because of the subprime mortgage marketcollapse.

Freiberg joined E*Trade in March 2010, two weeks after thecompany said its preferred candidate was no longer a possibility.The executive came from Citigroup Inc., where he had worked forthree decades.

His departure comes days after Citadel sought to acquire astake in Knight Capital Group Inc. The trading firm rejected alast-minute, $500 million rescue-loan offer from Citadel on Aug. 5as it worked on a competing plan from a group of investors, saidtwo people with knowledge of the matter.

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