Charles Schwab Backs Out of Yield Plus Class Action Settlement

The San Francisco Chronicle reported today that Charles Schwab plans to terminate their agreement to settle a class action lawsuit filed on behalf of shareholders in Schwab’s YieldPlus fund–an ultra-short-term-bond fund. According to the Chronicle, Schwab has already put half of the $235 million settlement amount in escrow with the remainder to be paid in January. A hearing on Schwab’s decision is scheduled for November 18.

Numerous YieldPlus investors elected to opt out of the class action in order to pursue an individual securities arbitration claim against Schwab to recover their losses. The opt out deadline was December 28, 2009. According to an April 21, 2010, article in the S.F. Chronicle, Schwab paid approximately $48 million to resolve individual customer arbitration claims while another 194 individual arbitration claims seeking $34 million in damages were still pending at the time of the Chronicle’s article.

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