Charles Schwab Corporation Case 03/18/2008

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Company Name(s): 
Charles Schwab Corporation
Case Name: 
Charles Schwab Corporation Case 03/18/2008
Case Status: 
Lawsuit Filed
Affected Securities
NASDAQ: SCHW
Lawsuit Overview
Type of Lawsuit: 
Securities Purchaser Class Action
Date Filed: 
03/18/2008
Class Period Begin: 
03/17/2005
Class Period End: 
03/18/2008
Summary: 

According to a press release dated March 19, 2008, a proposed class-action lawsuit was filed on behalf of those who purchased Schwab YieldPlus Funds Investor Shares or Schwab YieldPlus Funds Select Shares from Charles Schwab Corporation during the Class Period.

Specifically, the complaint claims Charles Schwab Corporation headquartered in San Francisco, CA, the funds’ underwriter, investment advisers and officers and directors issued untrue statements regarding the lack of diversification of these funds and the extent of investments assigned to sub-prime mortgage backed and related securities. The complaint alleges the funds registration statements and prospectuses contained untrue statements of material facts, and omitted important information regarding the funds’ investments, ultimately misleading investors.

On Nov. 15, 2004, the Company began offering the Schwab YieldPlus investment funds through a registration statement and prospectus. The YieldPlus funds are advertised by the defendants as ‘a safe alternative to money market funds that preserve principal while being designed with your income needs in mind’. Throughout the Class Period the Company claimed the funds were investments in a large, well-diversified portfolio, a seasoned team of taxable bond portfolio managers actively managed the funds, and that investment in Schwab YieldPlus would return higher yields on cash with only marginally higher risk, a smart alternative. Since July of 2007, the share price for the funds began lowering, for a total loss of 18 percent. Today the funds stand at an all-time low of $7.96, down more than 11 percent from Jan. 1, 2008.

The lawsuit claims the funds are not well diversified, instead concentrated in a single risky industry with more than 50 percent of the funds assets invested in the mortgage industry. The lawsuit seeks remedies under the 1933 Act on behalf of all fund purchasers during the Class Period.

According to Judge William Alsup’s April 28th orders, motion to relate cases were granted.