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Rating:Schwab Hit With Suit Over High Yield Fund Losses Not Rated 2.0 Email Routing List Email & Route  Print Print
Tuesday, June 10, 2008

Schwab Hit With Suit Over High Yield Fund Losses

Reported by Erin Kello

Another law firm is going after Schwab in conjunction with losses in its high yield funds. Klayman & Toskes has filed a class action suit against the company for representing its Schwab Yield Funds as "safe alternatives" to money market funds and cash holdings. The funds lost about $1.3 billion in value between July 1, 2007 and April 30, 2008.

Chicago-based law firm Stoltmann Law Offices currently has several claims pending against Schwab for losses in the high-yield funds in Finra arbitration.

In April, Andrew Stoltmann of Stoltmann Law Offices told the MFWire that Schwab was trying to privately settle with some investors. He said the company's Client Advocacy Group has offered settlements of around 10 cents on the dollar to investors who lost money in the fund.


Company Press Release

NEW YORK, NY -- 06/10/08 -- The Securities Law Firm of Klayman & Toskes ("K&T"), www.nasd-law.com, announced today that investors who lost money in Schwab Yield Plus Select Fund (NASDAQ: SWYSX) or Schwab Yield Plus Fund (NASDAQ: WYPX) (collectively referred to as the "Schwab Yield Funds") and who wish to inquire about the class action, Case No. 08-cv-01510, should contact K&T to discuss all of their legal options.

According to K&T's investigation so far, investors of the Schwab Yield Funds were assured that the Schwab Yield Funds were "safe alternatives" to money market funds and cash holdings. However, between July 1, 2007 and April 30, 2008, investors lost about $1.3 billion in the Schwab Yield Funds. As it turns out, much of the losses were sustained as a direct result of subprime holdings in the Schwab Yield Funds.

In connection with its sales of the Schwab Yield Funds, Charles Schwab (NASDAQ: SCHW) failed to inform investors that the Funds' managers had concentrated the Funds' assets in collateralized bond obligations ("CBOs"), collateralized loan obligations ("CLOs"), and collateralized mortgage obligations ("CMOs"), collectively referred to as "collateralized debt obligations" ("CDOs") or "structured financial products." These securities were and are thinly traded and illiquid, and often difficult to value. Essentially, investors of the Schwab Yield Funds received a mutual fund concentrated in speculative, risky mortgage backed securities. The manner in which the Schwab Yield Funds were invested made them more like hedge funds rather than money market funds.

If you lost $50,000 or more in the Schwab Yield Funds, please contact Steven D. Toskes, Esquire or Jahan K. Manasseh, Esquire of Klayman & Toskes, P.A., at 888-997-9956, for a free consultation regarding your legal rights and remedies. You may also visit us on the web at http://www.nasd-law.com.

Klayman & Toskes, an experienced, qualified and nationally recognized securities litigation law firm, continues its representation of investors throughout the world in securities arbitration and litigation matters against major Wall Street brokerage firms.  

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