California Securities Fraud Lawyer Blog

Investors who purchased the Schwab Yield Plus (SWYPX and SWYSX) money market funds, have until December 28, 2009, to decide whether to remain in the pending class action lawsuit or affirmatively "opt out" and pursue a securities arbitration claim. The following investors will be automatically included as class members if they do not take steps to opt out of the class action:

1. Those that purchased the funds between November 15, 2006, and March 17, 2008;
2. Those that purchased the funds between May 31, 2006, and March 17, 2008; and
3. Any California resident who held the funds on September 1, 2006.

Investors should carefully consider whether or not opting out is the right choice for them based on their individual circumstances. Investors who elect to opt out of the class action can join hundreds of other investors who have filed their own independent securities arbitration claims with the Financial Industry Regulatory Authority (FINRA).

For more information, please see our previous blog posting: Securities Arbitration vs. Class Actions: Consider Your Options

In a regulatory filing today, San Francisco-based Charles Schwab reported that it received a Wells Notice from the Securities and Exchange Commission (SEC) for alleged securities law vioations regarding its Schwab YieldPlus and Total Bond Market Fund.

A Wells Notice is is not a finding of wrongdoing. It is letter from the SEC advising the recipient of the enforcement staff's decision to recommend that the SEC bring enforcement proceedings against the recipient. The letter will specify the violations that the SEC staff believes to have occurred and the relief the SEC intends to seek and the forum in which the SEC intends to bring an action. The violations will be described in fairly general terms.

More Information:

Schwab YieldPlus Fund

Charles Schwab & Co.

A Notice of Pendency of Class Action was issued in the class action matter In re Schwab Corp. Securities Litigation currently pending in San Francisco federal court. Investors who purchased shares of the Schwab YieldPlus Fund that qualify as class members will be automatically included in the class action, unless they submit a request for exclusion from class membership. The court's deadline for opting out is December 28, 2009. YieldPlus investors who opt out may want to consider pursuing a claim for their losses through arbitration before the Financial Industry Regulatory Authority (FINRA), as many investors have already done.

For more information, please click on the following links:

View Notice of Pendency of Class Action

Blog Post: Securities Arbitration vs. Class Actions: Consider Your Options

More YieldPlus Blog Postings

Frequently Asked Questions About Securities Arbitration

Here is a bit of good news for investors with securities arbitration claims against 14 of the largest brokerage firms, including Merrill Lynch, Morgan Stanley Smith Barney and Wells Fargo. The Financial Industry Regulatory Authority (FINRA) has agreed to extend its year-old pilot program established to give investors the option to request an arbitration panel composed entirely of arbitrators that are not affiliated with the securities industry. Currently, a 3-person arbitration panel must include one industry arbitrator and two public arbitrators. The pilot program was created in response to criticism over whether an industry arbitrator, such as a stockbroker or branch manager, can act impartially when a customer is complaining about securities fraud or account mismanagement by their broker. I've participated in arbitrations with both good and bad industry arbitrators. The trouble is, allowing an industry arbitrator to sit on a panel gives the appearance of bias and takes away from the legitimacy of the proceedings. That should be reason enough to dump the industry arbitrator. My California securities law firm is in favor of the pilot program and we have been actively encouraging clients to participate whenever possible.

The brokerage firms who have agreed to participate in the pilot program are:

Ameriprise Financial Services
Charles Schwab
Chase Investment Services
Citigroup Global Markets
Edward Jones
Fidelity Brokerage Services
LPL Financial
Merrill Lynch
Morgan Stanley Smith Barney
Oppenheimer
Raymond James
TD Ameritrade
UBS Financial Services
Wells Fargo Advisors / Wachovia Securities

Each of the above firms has committed to participate in a limited number of cases under the program on a first come, first served basis. The pilot program will end on October 5, 2010. Since the average arbitration hearing takes 14 ½ months to conclude, most cases in the pilot program have not gone to hearing yet. FINRA plans to compare the results of the pilot program cases with non-pilot cases. Of the 396 arbitration cases that have been decided this year, only 139 (45%) recovered anything at all. Hopefully, the arbitration award results for cases in the pilot program will be much better. If the pilot program results in more awards in favor of customers, will the brokerage industry lobby to keep the industry arbitrator? Let's hope not.

A San Francisco federal judge has issued an order certifying a class action lawsuit against Charles Schwab & Co. alleging securities law violations in connection with Schwab's beleaguered YieldPlus Fund. The parties are required to submit to the court by September 10, 2009, a proposed timeline for class members that want to opt out of the class action. An updated blog posting will be issued once the opt out deadline is known. Click here to view all YieldPlus blog postings.

Three Classes of Investors Are Included in the Class Action

The court's order creates three different classes of plaintiffs. The three classes are:

1. Yield Plus investors that acquired shares between November 15, 2006, and March 17, 2008.
2. YieldPlus investors that acquired shares between May 31, 2006, and March 17, 2008.
3. California residents who held shares in the YieldPlus fund on September 1, 2006.

YieldPlus investors not included in the above categories are excluded from the class action. However, investors omitted from the class still have the option of filing their own securities arbitration claim against Schwab to recover their YieldPlus losses. Unlike class actions, which must be pursued in court, individual claims must be submitted to arbitration before the Financial Industry Regulatory Authority (FINRA).

Class Members Can Opt Out of the Class Action

Members included the class action also have the right to opt out of the class. Class members that elect to opt out can file a claim for their YieldPlus losses with FINRA.. For more information about opting out of a class action and submitting an arbitration claim, please see our blog posting: Securities Arbitration vs. Class Actions: Consider Your Options

Click here to view all YieldPlus blog postings.

Today, New York Attorney General Andrew Cuomo filed a securities fraud lawsuit against San Francisco-based Charles Schwab & Co. charging the firm with making false representations in the sale of auction rate securities (ARS). According to the complaint filed by the Attorney General, Schwab misrepresented auction rate securities as suitable for customers seeking a safe and liquid investment. The Attorney General has obtained telephone recordings of conversation between Schwab brokers and customers, including one instance where a broker made misrepresentations to their customer stating that auction rate securities are "great alternatives to cash." Schwab sold hundreds of millions of dollars worth of auction rate securities to its customers who were undoubtedly mislead about inherent risks associated with these complex investments.

See related blog posting: San Francisco's Charles Schwab Corp. Facing New Securities Fraud Allegations Over the Sale of Auction Rate Securities [07/21/200]

Yesterday, San Francisco-based Charles Schwab Corporation publicly denied recent allegations that it engaged in fraudulent marketing practices in the selling of Auction Rate Securities (ARS). These latest securities fraud allegations come from New York Attorney General Andrew Cuomo who has purportedly uncovered emails and testimony establishing that Charles Schwab brokers had little knowledge about these ARS investments when they recommended them to their unsuspecting customers. Cuomo's office is also alleging that Schwab misrepresented these securities as a safe investment and failed to warn its customers about the impending collapse of the ARS market. So far, Charles Schwab has denied the attorney general's allegations.

Schwab is already facing a slew of customer arbitration claims that allege similar misconduct in connection with the sale of its YieldPlus funds that were marketed to conservative investors as low-risk investments. I have been monitoring these cases and Schwab has been aggressively defending these cases with mixed results according to the results in cases that have already gone to hearing.

Click here to view all YieldPlus blog postings.

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