Posted On: April 22, 2010

Schwab Must Pay SSEK Client $604,094 Over California Yield Plus Fund Investments, Says FINRA Arbitration Panel

Our stockbroker fraud law firm is happy to announce that a Financial Industry Regulatory Authority panel has awarded one of our clients her entire principal loss of $604,094 for her securities fraud claim related to the Schwab California Tax-Free Yield Plus Fund. The award is not part of Schwab’s $200 million class action settlement.

Like Schwab’s Yield Plus fund, SWYCX was marketed as an ultra short-term bond fund and an alterative to money market holdings or cash. In fact, not only were the securities illiquid, hard to value, untested, thinly traded, and highly vulnerable to market changes, but the fund was exposed to variable-rate bonds that were pegged to the London Interbank Offering Rate.

Phone conversations recorded by Schwab with our client confirm the investor’s desire for safety of principal for her assets. During such exchanges, Schwab represented SWYCX as a better investment to Treasuries and Money Market and told the client that instead of holding such a large position in money market or cash for an extended time period it was better to place “cash” investments in the Yield Plus fund. Our securities fraud lawyers have other Schwab clients that were offered similar representations.

During arbitration, Schwab argued that any interest derived from the investment should be offset with the client’s principal loss, which would lower the damages by almost 50%. However, as Shepherd Smith Edwards and Kantas Stockbroker Fraud Lawyer Samuel Edwards noted, “Why should there be an interest offset for a product marketed as a money market alternative?” The FINRA panel agreed, awarding full capital loss, interest, costs, and legal fees.

Our stockbroker fraud law firm represents investors who sustained losses related to their Schwab investments. Your best bet for obtaining the maximum recovery possible is to speak with an experienced securities fraud lawyer about your case.

Related Web Resources:
Schwab Ordered to Pay Damages to Clients of Shepherd Smith Edwards & Kantas Over California Yield Plus Fund Investments("SWYCX"), iStockAnalyst, April 21, 2010

Schwab California Tax Free Yield Plus Fund, Financial Content