Protecting Investors - Securities law attorneys investigating financial fraud and Wall Street misconduct involving Lehman Brothers, non-traded REITs, bonds, ETFs

Vernon and Shine legal team: Florida retirees file arbitration claim to recover Schwab YieldPlus Fund losses (SWYSX, SWYPX)

A group of Florida retirees — whose losses in the Schwab YieldPlus Fund top $300,000 — have joined together to file arbitration claims today against Charles Schwab & Co. and former fund manager Kimon Daifotis. 

Schwab marketed its YieldPlus Fund as a safe and conservative “cash alternative” and compared its safety to that of one and two-year certificates of deposit on the Schwab web site.

But several Florida retirees who trusted Schwab with their nest eggs are now filing a claim with FINRA, the Financial Industry Regulatory Authority, asserting that Schwab deceived them with the reckless mortgage and asset-backed security strategy orchestrated in Schwab’s YieldPlus Fund.

The bond mutual fund’s price has decreased by more than 30 percent in the last year.  This price decrease has resulted in the virtual liquidation of the Schwab YieldPlus Fund (SWYSX, SWYPX) with the fund’s total net assets under management declining by more than $13 billion or — 96 percent — over the past year.  

The three Florida families who joined together to file today’s small group claim include:  an 82-year-old widow from Vero Beach; a retired computer consultant and artist from Longwood; and a retired accountant and homemaker from Port St. Lucie. All were longtime clients of Charles Schwab & Co.

The claim, filed by former Securities and Exchange Commission attorney Thomas F. Shine and investor rights attorney Chris Vernon, contends that Schwab committed gross misconduct when it embarked on a “damage control” campaign to avoid liquidations of YieldPlus by its clients. 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. The investors also claim Schwab and Daifotis misrepresented the safety of YieldPlus and failed to disclose material facts to investors about the fund.

Shine and Vernon were the first attorneys to file an investor claim naming Daifotis as a respondent. One day after filing that claim, Schwab announced that it had replaced Daifotis as YieldPlus Fund manager. 

Schwab is contacting some investors with settlement offers, but investors with larger losses are filing arbitration claims in the face of Schwab’s offers to pay pennies on the dollar (if anything) and refusal to acknowledge any wrongdoing or remorse for its actions.

In addition to representing Florida investors, Shine and Vernon are pursuing claims against Schwab on behalf of investors from California, Hawaii, Texas, New York and the Midwest.  

Shine, a former enforcement attorney with the Securities and Exchange Commission in Washington, D.C., is in private practice in the Melbourne, Fla. area. Chris Vernon is a founding partner of the Naples, Fla. based law firm Vernon Healy, which represents investors throughout the United States.

For information, contact:

Christopher T. Vernon, attorney at law
http://www.vernonhealy.com
http://www.protectinginvestors.com
239-649-5390
1-877-649-5394
e-mail: cvernon@vernonhealy.com

or

Thomas F. Shine, attorney at law
http://www.thomasfshinelaw.com
http://www.thomasfshinelawblog.com
321-724-4445
1-800-838-8320
e-mail: tfshine@aol.com

Charles Schwab Reporting YieldPlus Complaint Letters From Clients as Complaints Against Financial Consultants

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. 

 

Shine and Vernon legal team: Retiree Suing to Recover Significant 401(k) Losses in Schwab’s YieldPlus Fund Fiasco

Naples, Fla. — Charles Schwab & Co.’s removal of one of its most prominent fund managers has come too late for investors now suffering the disastrous consequences of the reckless mortgage and asset-backed security strategy orchestrated in Schwab’s YieldPlus Fund.

A retired emergency room physician from Hawaii, who lost more than $150,000 of the $510,000 he invested in Schwab’s YieldPlus Fund in his 401(k), filed an arbitration claim today that seeks recovery of his losses and damages.         

Schwab marketed its YieldPlus Fund to retirees and others as a safe and conservative “cash alternative” but the bond mutual fund’s price has decreased by more than 30 percent in the last year.  This price decrease has resulted in the virtual liquidation of the Schwab YieldPlus Fund (SWYX, SWYPX) with the fund’s total net assets under management declining by more than $13 billion or — 96 percent — during the past year.   

Schwab is contacting some investors with settlement offers, but investors with larger losses are filing arbitration claims in the face of Schwab’s typical offers to pay less than 10 cents on the dollar. Schwab’s offers come despite investors’ claims of misrepresentations and failures to disclose material facts by Schwab and former Schwab Yield Plus Fund manager Kimon Daifotis about the safety of the YieldPlus Fund to investors.

The claim, filed by former Securities and Exchange Commission attorney Thomas F. Shine and investor rights attorney Chris Vernon, contends that Schwab committed gross misconduct when it embarked on a “damage control” campaign and encouraged investors to hold on to their YieldPlus shares. 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.

On Schwab’s web site, the brokerage giant compared the safety of its YieldPlus Fund to that of one and two-year certificates of deposit. But that safety was a sham: YieldPlus fund manager Daifotis put increasing portions of the fund’s assets into higher risk asset-backed and mortgage backed securities. That concentration ultimately put the fund at risk for an enormous failure. That failure began as the subprime crisis rocked Wall Street.   

Shine and Vernon were the first attorneys to file an investor claim naming Daifotis as a respondent. One day after filing the claim in June, Schwab announced that it had replaced Daifotis as the fund manager of YieldPlus.

Investors from around the country are contacting Shine and Vernon, who have teamed up with other former SEC attorneys and investor rights attorneys on their investigation.

We are encouraging investors who’ve been contacted by Schwab to ask Schwab to retain custody of taped conversations between themselves and their investment advisor: We believe these recorded conversations will strengthen your potential claim against Schwab because it is unlikely that Schwab’s employees were even aware of the true level of risk associated with the fund, much less able to adequately disclose those risks to potential purchasers.

Shine, a former enforcement attorney with the Securities and Exchange Commission in Washington, D.C., is in private practice in the Melbourne, Fla. area. Chris Vernon is a founding partner of the Naples, Fla. based law firm Vernon Healy, which represents investors throughout the United States.

For more information, contact:

Thomas F. Shine, attorney at law
http://www.thomasfshinelaw.com
http://www.thomasfshinelawblog.com
321-724-4445
1-800-838-8320
e-mail: TFSHine@aol.com

or

Christopher T. Vernon, attorney at law
http://www.vernonhealy.com
http://www.protectinginvestors.com
239-649-5390
1-877-649-5394
e-mail: cvernon@vernonhealy.com