Articles Posted in Charles Schwab

Charles Schwab acknowledged that the SEC served it with a Wells Notice related to its sale of

two funds, the YieldPlus Fund and Total Bond Market Fund. A Wells Notice advises the firm that the SEC staff intends to recommend civil charges for possible securities violations.

The additional heat from the SEC may force Schwab to think about settling the many pending FINRA arbitrations against the firm. There is also a pending class action which was certified by a federal court in California in August. The litigation bills are growing.

The Charles Schwab YieldPlus Fund class action suit has generated some serious questions for investors to consider. The U.S. District Court in San Francisco issued a Notice of Pendency to class members which includes important information about how to opt out as a class member. Opt out requests must be received by the claims administrator no later than Monday, December 28, 2009. Investors therefore have to decide whether they intend to file individual arbitration claims against Schwab or whether they would like to remain in the class action. As we wrote about last week, investors around the country have recently won a string of FINRA arbitrations against Schwab based upon allegations that the Fund was over concentrated in mortgage backed securities.

Charles Schwab has been trying most of the many arbitration cases filed against it related to the Charles Schwab HighYield Plus fund. Last month, a Los Angeles based Finra panel awarded what appears to be almost 100% of an investor’s losses (about $75,000) in the fund, plus expert witness fees and all of the arbitrators compensation. The case is Chang v. Charles Schwab (Finra case number 08-02417) and is available on Finra’s website. This is one of a string of recent losses in the HighYield Plus fund cases based upon allegations that the fund was overconcentrated in mortgage backed securities. It will be interesting to see if Schwab starts settling more of these cases.