Charles Schwab gets warning from SEC staff

posted: 43 DAYS 5 HOURS AGO

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NEW YORK -Federal regulators have warned Charles Schwab Corp. that they could bring civil charges against the discount brokerage over two fixed-income mutual funds.

Schwab has been dealing with civil lawsuits and regulatory investigations of the two funds, the Schwab YieldPlus Fund and the Schwab Total Bond Market Fund.

The company said in a regulatory filing Wednesday that it received a so-called Wells notice from the Securities and Exchange Commission, saying the SEC staff intends to recommend civil charges against several Schwab affiliates for possible securities violations.

Companies that receive notices like the one given to Schwab have a chance to respond to allegations raised by SEC staff before the commission decides whether to approve an enforcement action. The notice is not a formal allegation nor a finding of wrongdoing.

Schwab said the charges are unwarranted and plans to respond to the notice.

Schwab is facing a class-action fraud lawsuit in federal district court in San Francisco over the YieldPlus fund. Investors claim the brokerage didn't fully disclose the risks of some securities held by the Schwab funds.

YieldPlus are short-term bond funds that investors say were marketed as conservative investments, but instead lost value last year due to investments in mortgage-backed securities.

San Francisco-based Schwab said in July it had paid $21 million in the first half of the year to settle client complaints and arbitration claims related to the YieldPlus investments.

Schwab shares rose 30 cents to close at $19.28, and slipped 33 cents in aftermarket trading.

2009-10-14 19:29:11