Charles Schwab financial consultants are starting to get dinged on their CRDs, the regulatory report card for stockbrokers, over the Schwab YieldPlus Fund fiasco. These dings can come in cases when the financial consultants relied on defective information from their employer, Charles Schwab, regarding Schwab’s YieldPlus fund.
Charles Schwab clients, who appropriately feel betrayed by the charade of safety that Charles Schwab used to market its YieldPlus Fund, have in some cases sent letters to Charles Schwab complaining about their financial consultants who recommended the fund as a safe alternative to cash. These complaint letters are typically entered on a broker’s CRD report that’s accessible to the public via the web site tool sponsored by FINRA, the Financial Industry Regulatory Authority.
Financial consultants (as well as Charles Schwab) clearly have “Know Your Security” suitability duties to know the essential facts about the products that they are recommending to their clients and to disclose the risks associated with those products. However, Charles Schwab financial consultants may feel that the risks pertaining to the Schwab YieldPlus Fund were not adequately disclosed in the fund’s prospectus and other SEC filings. Charles Schwab financial consultants may also feel that they were further misled by Schwab YieldPlus Fund marketing materials that effectively described the fund as an alternative to cash.
Moreover, Charles Schwab conducted a “damage control” campaign designed to provide Charles Schwab financial consultants with information that would deter them from recommending to clients that they sell the fund as the price declined. This damage control campaign occurred so that Charles Schwab could quietly dump several million shares from other Charles Schwab proprietary funds ahead of Charles Schwab’s retail clients, according to claims we’ve filed so far or are preparing to file on behalf of investors from Florida, Hawaii, Texas, California, New York, and other states.
Some Charles Schwab financial consultants (and former consultants) may ultimately be supportive of clients who pursue YieldPlus claims against Schwab and agree that Charles Schwab misled investors. Merely sending a complaint letter to Charles Schwab, as opposed to filing an arbitration claim or lawsuit against Charles Schwab, does little to assist the investor in recovering losses or damages from Charles Schwab. Similarly, the complaint letter does little harm to Charles Schwab but opens the door for Charles Schwab to file regulatory reports that disclose that a customer has complained about one of its brokers in connection with the sale of YieldPlus.
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