Stoltmann Law Offices
We are seeking the recovery of client losses, attorney fees, interest, costs and punitive damages for the victims of Charles Schwab investment fraud.
It is not just individual investors who can recover for Schwab fraud in the YieldPlus Investor Fund. Both corporations and charitable foundations can also file arbitration claims for the same claims as individual investors.
If you lost at least $10,000, you are eligible to participate in a FINRA arbitration claim with Stoltmann Law Offices.
The true material facts, or material facts omitted necessary to make the statements made not misleading and/or omitted material facts required to be stated therein, were:
a. The Funds were and. are not well-diversified and were concentrated in a single risky industry or market segment – in reality, over 50% of the Funds assets are now invested in the mortgage industry, and that percentage grew as Defendants abandoned the objectives of the Funds in pursuit of higher yields;
b. A material portion of all the bonds were issued by the Fund’s top 10 broker dealers, who sold the funds shares;
c. There exists no primary market for most of the bonds, and in fact, the only market was, for many, the issuers themselves;
d. The duration of a vast majority of the bonds is greater that 2 years, with a majority of the bonds not having a publicly available duration;
e. The Funds credit and market analysts did not have any real expertise in valuing the mortgage backed securities they purchased, or assessing the risk;
f. The Funds relied blindly on the ratings by agencies who were paid by the Funds’ broker-dealers; and
h. The net asset values (“NAVs”) of the Funds were highly speculative and inflated.
i. The Funds “invests in a large, well-diversified portfolio of taxable bonds … .”
j. “To minimize changes in share price or NAV, the fund seeks to maintain an average portfolio duration of one-year or less.”
k. “The [Funds were being] actively managed by a seasoned team of taxable bond portfolio managers who are supported by a team of credit and market analysts. The team use a disciplined approach … .”
The November 17, 2007 Prospectus for the Schwab YieldPlus Investor Fund discloses the following:
a. “The Schwab YieldPlus Fund is an ultra short-term bond fund, designed to offer high current income with minimal
changes in share price. The fund seeks to keep the average duration of its portfolio at one year or less.”
b. “Strategy: To pursue its goal, the fund primarily invests in investment-grade bonds (high and certain medium quality, AAA to BBB– or the unrated equivalent as determined by the investment adviser). The fund may invest in bonds from diverse market sectors based on changing economic, market, industry and issuer conditions… To help maintain share price stability and preserve investor capital, the fund seeks to maintain an average portfolio duration of one year or less.”
c. “The fund’s investment strategy is designed to offer higher yields than a money market fund while seeking minimal changes in share price.”
d. “The fund may invest in derivatives including, without limitation, futures, options, and swaps (including credit default swaps) which relate to fixed income securities, interest rates, and other assets and related indices….The fund typically uses derivatives for risk management purposes and as a substitute for taking the position in an underlying asset.”
The Schwab YieldPlus Fund was down 18.5% during 2007, putting it at the bottom of its ultra-short bond-fund category. On average, such funds are down only 0.37% in 2007. Schwab cannot claim the market caused the fund meltdown. It was caused by the Schwab fund managers taking a concentrated speculative position in a short term fund that by law needed to be diversified.