The investor rights’ legal team headed by former Securities and Exchange Commission attorney Thomas F. Shine and investor rights’ attorney Christopher T. Vernon filed claims on behalf of Schwab YieldPlus Fund investors in Minnesota and Missouri today.
The Shine-Vernon team has now filed arbitration claims on behalf of investors from California, New York, Texas, Florida, Missouri, Minnesota, and Hawaii as part of its nationwide fraud investigation of Charles Schwab’s misrepresentations to investors about its Schwab YieldPlus Fund.
Charles Schwab promoted its Schwab YieldPlus Fund as a safe and conservative “cash alternative” and compared its safety to that of one and two-year certificates of deposit, but investors have seen the bond mutual fund’s price fall by almost 40 percent during the past sixteen months. More and more investors are seeking to file claims with the Financial Industry Regulatory Association (FINRA) in their quest for legal recourse.
Charles Schwab deceived Schwab YieldPlus investors by concentrating the fund in mortgage and asset-backed securities while it recklessly touted the fund’s safety on its web site and to financial advisors who recommended the fund to investors. According to the claims filed today, Schwab issued inaccurate statements or omitted information regarding material facts about the fund’s lack of diversification.
In addition, Charles Schwab executives and former high profile fund manager Kimon Daifotis embarked on a “damage control” campaign to avert liquidations of Schwab YieldPlus by Charles Schwab clients, the claims contend. Behind the scenes, Schwab quietly dumped 2.9 million YieldPlus shares from the portfolios of its other mutual funds during that time — from Jan. 31, 2008, to April 1, 2008 — while clients held their shares.
The claims filed today are on behalf of investors with close to $300,000 in losses. They include one claim filed on behalf of a retired publisher of a faith-based journal and another on behalf of a business owner. Both investors were seeking safety for the funds that they invested in the Schwab YieldPlus Fund.
The Shine-Vernon team was the first legal team to name Daifotis in claims filed on behalf of investors. Schwab disclosed in June that it had replaced Daifotis as the fund’s lead portfolio manager and Daifotis has been terminated by Charles Schwab, the brokerage firm.
Investors have been encouraged by a recent case in which a FINRA arbitration panel awarded a Schwab YieldPlus Fund investor more than $500,000.
Although the economic outlook of many financial industry firms has been damaged in the ongoing credit crisis and recession (in no small measure because of the imprudent risks these firms took at investors’ expense), the Shine-Vernon team believes that Charles Schwab is financially strong enough to pay all damages awarded against it.
Investors who lost relatively small amounts of their principal may be able to get relief from a class action lawsuit now pending against Charles Schwab, to the extent they cannot resolve their claims through Schwab’s Client Advocacy Team. However, investors who have lost significant amounts of principal as a result of investing in YieldPlus should pursue securities arbitration, the Shine-Vernon legal team believes.