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Schwab YieldPlus Case Ends in Settlement

Short of the firm's May 10 trial date, The Charles Schwab Corporation has settled with plaintiffs in the consolidated cases related to the Schwab YieldPlus fund.   In this class action suit, the plaintiffs alleged that the fund's registration statements and prospectuses contained untrue statements , and omitted important information about the level of diversification of these funds and the extent to which the fund investment invested in sub-prime mortgage backed and other related securities.

The YieldPlus funds were marketed to investors as "a safe alternative to money market funds that preserve principal while being designed with your income needs in mind."  Though the fund's disclosures stated that the portfolio would be well-diversified, the plaintiffs claimed that the funds were not, in fact, diversified, but heavily invested in a single industry, with more than half the portfolio invested in the mortgage industry.  Consequently, the plaintiffs asserted that the YeildPlus fund was neither stable nor safe, and given the risky concentration, not a "safe alternative to money market funds that preserve principal." 

The settlement amount, subject to court approval, is set at $200 million. A summary of the case, and links to various pleadings and filings can be found at: