Charles Schwab Corp. has received a Wells notice from the Securities and Exchange Commission about possible civil charges related to the discount brokerage’s Schwab Total Bond Market Fund and Schwab YieldPlus Fund. Schwab has been the target of regulatory investigations over the two funds and is a defendant in a number of civil lawsuits.
SEC staff members plan on recommending civil charges against a number of Schwab affiliates over possible securities violations. The Wells notice is not a finding of wrongdoing or a formal allegation. It does, however, give Schwab an opportunity to respond before the SEC makes a decision on whether to move forward with an enforcement action. The discount brokerage says the possible charges are unwarranted.
In San Francisco, Schwab is defending itself against a class-action fraud lawsuit in federal district court. YieldPlus fund investors are accusing the brokerage firm of failing to fully disclose the risks connected with some securities in the Schwab funds.
The brokerage firm says that during the first half of 2009, it paid $21 million to settle arbitration claims and lawsuits related to these investments. According to Investment News, between September 1 and October 1, 2009, Schwab lost 7 out of 10 YieldPlus Finra arbitration cases. FINRA says awards against the brokerage firm totaled $772,000.
FBR Capital Markets analyst Matt Snowling says the Wells notice could directly impact current and upcoming arbitration claims and litigation from investors who sustained losses from Schwab’s two fixed-income mutual funds. Snowling says that the Wells notice and ongoing FINRA arbitration over the bonds funds increases the chances Schwab will likely have to settle the class-action fraud lawsuit.
Please also refer to the ugent notice our securities fraud lawyers posted on our Blog site this week about what a Schwab YieldPlus investor must do to file a private claim.
Related Web Resources:
Schwab slapped with SEC warning; YieldPlus settlement may be on the horizon, Investment News, October 15, 2009
Charles Schwab Receives Wells Notice From SEC – Filing, WSJ, October 14, 2009