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Compliance October 15, 2009
SEC Hits Schwab with Wells Notice over Bond Funds
Charles Schwab has been notified by the U.S. Securities and Exchange Commission (SEC) that it could be the target of an SEC civil suit.
Reported by Fred Schneyer
Schwab said in an SEC securities filing that it received a Wells notice on Wednesday, indicating SEC staff will recommend the regulator file the suit alleging securities law violations connected to the Schwab YieldPlus Fund and the Schwab Total Bond Market Fund.
“The Company intends to respond to the notice to explain why it believes enforcement charges are unwarranted,” Schwab said in the SEC document.
Schwab has been the target of civil suits and regulatory investigations focusing on its handling of the two funds. The lawsuits filed against Schwab in recent months have alleged the company improperly represented the funds as safe for investors and as an alternative to cash when the funds were actually laden with risky mortgage-backed securities, according to the filing.
The SEC serves a Wells notice on a company to notify it about a potential government regulatory action and to provide an opportunity for the targeted firm to offer a defense.