FINRA Arbitration Claims Over Schwab YieldPlus Losses Keep Coming
There appears to be no end in sight for the arbitration claims that keep piling up against Charles Schwab & Co. over losses suffered by investors in the Schwab YieldPlus Fund and the Schwab YieldPlus Select Fund. As recently as April 2009, investor claims were filed with the Financial Industry Regulatory Authority (FINRA), charging Schwab with breach of fiduciary duty, negligence, misrepresentation and fraud.
The focus of the claims centers on the fact that Schwab allegedly failed to disclose certain risks about the Schwab YieldPlus Funds. Specifically, investors say Schwab marketed and sold the funds as safe, low-risk alternatives to money-market investments, with the idea they would generate higher potential returns at only a slightly higher risk.
It turns out the Schwab YieldPlus Funds were heavily invested in subprime mortgage-backed securities, with more than 50% of the funds’ assets in these high-risk products. In the face of the subprime mortgage market collapse, this over-concentration caused investors to suffer $1.3 billion in losses between July 1, 2007, and April 30, 2008.
Since then, investors from Indiana to California have taken legal action against Charles Schwab, filing both arbitration claims with FINRA and class-action lawsuits. So far, FINRA arbitration panels have ruled in favor of several investors. In one decision, FINRA awarded more than half a million dollars, or about 81% of the investor’s claimed damages. Other FINRA claims have resulted in awards totaling 100% of investors’ claimed damages.
Our affiliation of lawyers is actively involved in advising individual and institutional investors in evaluating their legal options when confronted with subprime and other mortgage-related investment losses.
