On June 26, 2009, a Washington, D.C., arbitration panel of the Financial Industry Regulatory Authority (FINRA) ruled in favor of investor David Cutler and his claim (FINRA No. 09-00300) against Charles Schwab & Company and its Schwab YieldPlus Fund.
The panel awarded Cutler $11,400.
Cutler’s complaint against San Francisco-based Charles Schwab is similar to hundreds of other arbitration claims filed with FINRA by investors who allege that Charles Schwab misrepresented the risks of the Schwab YieldPlus fund by failing to disclose important information about the risky securities it held.
Specifically, the Schwab YieldPlus fund was marketed and sold as a safe and conservative alternative investment to money market funds. Later, investors learned the YieldPlus fund was heavily concentrated in high risk and toxic subprime mortgage-backed securities and in even more risky collateral debt obligations (CDOs). Ultimately, Schwab’s failure to diversify the fund’s portfolio caused investors to collectively lose approximately $1.3 billion in 2008.
In 2008, approximately 74% of customer claimant cases filed with FINRA resulted in monetary settlements or awards for the investor.