$118 Million in "I'm sorry" from Charles Schwab

Posted On: January 16, 2011 by Law Offices of Ralph Behr

Charles Schwab agreed to pay the SEC $118 million to settle securities and fraud charges arising from its sale of its “YieldPlus” branded funds. The settlement requires a total payment of $118 million into a "fair fund": a pool of money which will be made available to reimburse investors who can prove that they were harmed due to being drawn into this investment vehicle. FINRA , quite proudly, issued a press release in which they said 17.5 million dollars of the money was the amount of fees Swab collected on the fund, plus a $500,000 fine. Charles Schwab, as we understand: between September 2006 and February 2008 sold over $13.75 billion in it’s “YieldPlus” fund to customers. This finding was that during the existence of the fund things changed in the underlying mortgage-backed securities market but Charles Schwab did not change its marketing information. Failure to properly advise their clients about the risks, which were known, constitutes the fraud for which Charles Schwab agreed to pay. During the life of the fund Charles Schwab never changed their selling material didn't take sufficient actions to have their brokers advise investors of the underlying changes in the risk of owning mortgage-backed securities. “YieldPlus” was marketed as a low risk investments which was characterized as such. Lesson to be learned: review your investments on an ongoing basis. How? Ask….what’s new in the bond market? What’s new in the municipals markets? How are my investments looking today as opposed to when we bought them? Take the time so you won’t see me professionally. Problems avoided are better than problems which can wreck your retirement..yes? yes! If, sadly, it is too late, then call me for a free consultation.