Please Note: You are viewing the unstyled version of Subprimelosses. Either your browser does not support CSS (Cascading Style Sheets) or it is disabled. As a result, much of this website will not look the way it was intended, although all of its contents will be accessible to you. For more information, visit our Browser Support page.

Skip to Primary Site Navigation, Secondary Site Navigation, Content

Home > Cases > Charles Schwab > Charles Schwab FAQs for Investors

FAQs For Schwab Investors

Schwab Yieldplus: Latest Answers To Your Questions

What is the latest development with the Schwab YieldPlus Funds?

On Aug. 21, 2009, a California federal court issued an order allowing a lawsuit involving the Schwab YieldPlus Funds - the Schwab YieldPlus Fund Select Shares (SWYSX) and the Schwab YieldPlus Investor Shares (SWYPX) - to proceed as a class action. For investors who are included in this class action, this newest legal development means they must now either stay in the class action lawsuit or affirmatively “opt out” if they wish to file an individual arbitration claim with the Financial Industry Regulatory Authority (FINRA formally NASD).

The deadline to formally opt out is Dec. 28, 2009.

Aggrieved investors need to weigh their decision carefully in determining how to proceed in the Schwab YieldPlus class-action lawsuit versus opting out and proceeding in an individual FINRA arbitration. In general, an individual FINRA arbitration may present more opportunities for a greater recovery for individual and institutional investors if they suffered significant losses. However, where an investor's losses are small, it might not be economically feasible to proceed in a FINRA arbitration and the Schwab class action lawsuit might be a viable option.

It is important to understand that you are generally in a class action unless you formally ask to be excluded. This means you need to opt out of the class action or you will be bound by its results. For information on how to opt out of the Charles Schwab class action, please contact us at 866-827-6537.

How do I opt out?

The class action notice currently is being delivered to Schwab YieldPlus investors who are in the class. Once you receive this notice, which is titled Notice of Pendency of Class Action, the following steps must be taken if you intend to opt out of the Schwab YieldPlus class action lawsuit:

  • Provide a written statement that says you are requesting exclusion from the Schwab YieldPlus class-action lawsuit;
  • Sign and date your request, as well as provide your address; and
  • Mail the above information by Dec. 28, 2009, to:

In re Schwab Corp. Securities Litigation Exclusions
c/o Gilardi & Co. LLC
P.O. Box 808061
Petaluma, CA 94975-8061

All requests for exclusion from the Schwab YieldPlus class action lawsuit must be received by the Notice Administrator by Dec. 28, 2009. Additional information regarding the opt-out process is posted on the Web site, http://www.hbsslawsecurities.com/YieldPlus, in a PDF document titled October 12, 2009, Notice of Pendency.

Is it too late to pursue an individual claim to recover money lost in the Schwab YieldPlus Funds?

No. As a rule, limitations periods exist that require investors to file a claim within a certain period of time. Statutes of limitations vary depending on state law and the location of the individual client. Please contact an attorney for further details about the eligibility of your potential claim.

What is the background of investors' claims against Charles Schwab and the Schwab YieldPlus Funds?

The YieldPlus Funds were first offered by San Francisco-based brokerage Charles Schwab in 2004. At the time, Schwab advertised and marketed the funds as a safe alternative to money market investments and as a cash substitute. According to the company, the YieldPlus Funds were designed to preserve capital and generate income with very minimal price fluctuation.

Ultimately, the representations made by Charles Schwab did not live up to their promises. At times, more than 50% of the Schwab YieldPlus Funds' assets were invested in mortgage related securities. This over-concentration in housing related investments in 2007 and 2008 exposed investors to substantial risks that resulted in significant losses to Schwab YieldPlus investors.

Eventually, thousands of investors sustained substantial financial losses in an investment that Schwab touted as a safe and conservative money market and cash alternative. Many of these investors have filed FINRA arbitrations, alleging that Charles Schwab not only misrepresented the Schwab YieldPlus Funds but also failed to disclose crucial details about the funds' large and inappropriate concentration of mortgage related holdings.

How much did the Schwab YieldPlus Funds decline?

At one point in time, the funds contained $14 billion in assets. In 2008 alone, the funds' net asset values fell more than 30%. Schwab YieldPlus' assets have fallen from $6.5 billion at the beginning of 2008 to just over $500 million at the end of July.

On Aug. 28, 2008, Morningstar characterized the Schwab YieldPlus Funds as an “unmitigated disaster,” advising shareholders who hadn't yet sold their shares of the funds to do so.

Does it matter how I purchased my shares of the Schwab YieldPlus Fund?

If you purchased a Schwab YieldPlus investment through Charles Schwab, you are owed certain duties. If Schwab recommended the Schwab YieldPlus Fund to an investor, it has a duty to accurately disclose and explain the potential risks. If the Schwab YieldPlus Fund was sold to you as: 1) a money market substitute; or 2) as a cash alternative; or 3) as a conservative, low-risk investment, then you probably have valid claims against Charles Schwab. Once we review your individual situation, we can provide a more definitive assessment of the viability of your case.

I have a good relationship with my stockbroker, and don't want to cause trouble. However, I also want to recover my Schwab YieldPlus losses. Is there a way to do both?

Yes. We generally do not name stockbrokers in FINRA arbitrations based on the recommendation of YieldPlus investments.

It is a reasonable assumption that the information and recommendations a broker provides his or her clients will be accurate and true. At Wall Street brokerages, individual brokers generally do not research specific investments the firm recommends. Instead they rely on their firms to vet potential funds and investments like Schwab YieldPlus and simply relay the opinions of their firms. We have heard from several Schwab brokers who told us they did not understand some critical aspects of the Schwab YieldPlus investment at the time they were selling the fund to clients.

To date, the FINRA arbitration being handled by our firms on behalf of investors in the Schwab YieldPlus Funds do not target or name individual Charles Schwab brokers.

I was not told nor did I understand that the Schwab YieldPlus Funds had exposure to subprime mortgages. Had I known this, I would not have invested in them. What can I do?

Many investors in the Schwab YieldPlus Funds were retirees - individuals who put their into the fund because they thought it was a safe, money market like investment or a cash alternative. Unbeknownst to these individuals, the Charles Schwab's YieldPlus managers exposed a significant percentage of Schwab YieldPlus' assets to risky mortgage-related securities. If Charles Schwab failed to make you aware of the significant risks associated with an investment in the Schwab YieldPlus Funds, contact us today for a free evaluation of your options.

Does it cost me any money to file a lawsuit?

First and foremost, our team of lawyers will work with you to review your situation. You are not responsible for any attorney fees unless a recovery is obtained. To review your case, please contact us.

Where can I find articles or additional information about the Schwab YieldPlus Funds?

This Web site offers a comprehensive library of articles and the latest developments on the Schwab YieldPlus Funds, as well as information on other investment-related issues.


Top