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Home > Blog > FINRA Rules Against Charles Schwab In YieldPlus Claim

FINRA Rules Against Charles Schwab In YieldPlus Claim

A Financial Industry Regulatory Authority (FINRA) arbitration panel in Reno, Nevada, has ruled in favor of investors and their claim against Charles Schwab (SCHW) for financial losses suffered in the Charles Schwab YieldPlus Funds. In ruling against San Francisco-based Schwab, FINRA awarded Raymond and Elsie Kelly $74,430 plus interest, as well as $25,650 for attorney fees. In addition, FINRA assessed the entire costs of the arbitration proceeding – $5,250 – against Charles Schwab.

“Although Charles Schwab recommended the purchase of the Schwab YieldPlus Fund Select Shares (SWYSX) and the Schwab YieldPlus Investor Shares (SWYPX) as safe, conservative cash alternatives to investors, the evidence presented in this case clearly establishes that the funds were over concentrated in high risk, speculative mortgage-backed securities,” said the Kellys’ attorney Thomas Hargett of Maddox Hargett & Caruso, P.C.

Specifically, the Kellys’ arbitration claim (FINRA Case No. 08-02307) alleged that Charles Schwab marketed and sold the Schwab YieldPlus Funds as a conservative investment alternative to money market funds. In addition, the YieldPlus Funds supposedly offered a higher return potential with only marginally higher risks. In reality, the Schwab YieldPlus Funds held large concentrations of toxic subprime-related assets and other speculative products.

From June 2007 through June 2008, investors in the YieldPlus Funds lost 31.7%, while other ultra short bond funds experienced little or no losses.

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