Charles Schwab Hit with SEC Wells Notice for YieldPlus Funds

Charles Schwab acknowledged that the SEC served it with a Wells Notice related to its sale of
two funds, the YieldPlus Fund and Total Bond Market Fund. A Wells Notice advises the firm that the SEC staff intends to recommend civil charges for possible securities violations.

The additional heat from the SEC may force Schwab to think about settling the many pending FINRA arbitrations against the firm. There is also a pending class action which was certified by a federal court in California in August. The litigation bills are growing.

In May 2007, the Schwab YieldPlus Fund had more than $13 billion in assets. The YieldPlus family of funds were short-term bond funds that the firm marketed as conservative investments. However, they lost significant value in 2008 because they were loaded up with mortgage-backed securities.

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