FINRA Orders Charles Schwab to Pay $542,340 Over Short-Term Bond Fund Investor Claim

Earlier this month, a Financial Industry Regulatory Authority panel found Charles Schwab Corp. liable for $542,340 in an investor claim against the company over its YieldPlus short-term bond fund. This case is one of numerous individual arbitration and class action lawsuits against the San Francisco-based investment firm because of the fund.

The Schwab YieldPlus Fund had assets worth over $13 billion last year, but the fund suffered major losses this year because of mortgage-backed securities. At the end of last week, the fund’s assets were worth $432 million.

In this latest arbitration claim, investor Jeffrey Nielson accused Schwab and representative Darin Beckering of purposely misleading him when he purchased the ultrashort-bond fund because they did not fully disclose the extent to which the fund would be exposed to the subprime-mortgage market. Nielson also claims he was never informed that the Schwab YieldPlus Fund was a proprietary fund.

The fund has experienced a more than 30% drop this year. In another claim against Schwab related to its short-term-bond fund, the firm was ordered to pay $18,425 for losses. The YieldPlus Fund has resulted in a $16 million charge for the firm this year because of client complaints and arbitration claims.

Shepherd Smith Edwards & Kantas, LLP is a stockbroker fraud law firm that represents numerous clients with claims against Schwab related to the misrepresentation of its YieldPlus Fund. Its founder, Securities Fraud Attorney William Shepherd says the firm is in talks with dozens of other investors who purchased Schwab YieldPlus shares.

Related Web Resources:

Bond fund costs Schwab more than $500,000, InvestmentNews.com, October 10, 2008
Schwab YieldPlus Fund, Schwab.com
Financial Industry Regulatory Authority