San Francisco’s Charles Schwab Corp. Facing New Securities Fraud Allegations Over the Sale of Auction Rate Securities

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.

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In each of the YieldPlus cases that my office is handling, the Schwab broker recommended the YieldPlus fund as a safe alternative to investing in money market funds. If you have any questions or comments regarding a Schwab YieldPlus fund investment, please contact the Alcala Law Firm.

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