Corporate & Securities Law

Schwab May Settle YieldPlus Mutual Fund Class-Action Litigation

By James Eccleston

Charles Schwab may pay about $260 million to win public-relations points by settling investors' claims over losses in a bond fund with subprime holdings.

The San Francisco-based company is accused in eight proposed class-action suits of misleading investors by describing its YieldPlus mutual fund in prospectuses as only "marginally" riskier than cash.  From last July 1 through April 30, investors lost about $1.3 billion, according to Boston-based Financial Research Corp., which tracks investment flows for 35,000 funds.  This amount represents about 20 percent of what investors have lost. 

Schwab said in a May regulatory filing that it may settle suits "because of the uncertainty and risks of litigation."  A settlement "could be material to the company's operating results" for a particular period without harming its overall financial condition.

Schwab separately faces some arbitration claims and individual investors' suits.

Attorneys at SNSFE are advising clients as to whether or not they should participate in class-actions and whether or not they should participate in any other settlement offers by Schwab.  Those investors may contact attorneys at SNSFE.

Source:  Bloomberg.com

Full post as published by FinancialCounsel on June 16, 2008 (boomark / email).