Schwab Announces $200 Million Settlement Of Securities Class Action Lawsuit

SAN FRANCISCO — (Mealey’s) The Charles Schwab Corp. has agreed to a $200 million settlement of a securities class action lawsuit brought against it and certain of its executive officers and directors by investors alleging that the defendants misrepresented and concealed the investment company’s exposure to the subprime mortgage lending crisis in the offering documents for Schwab’s YieldPlus Fund, according to a press release issued by Schwab April 20 (In re Schwab Corp. Securities Litigation, No. 08-1510, N.D. Calif.).

According to the press release, under the terms of the settlement agreement, which is subject to court approval, Schwab admits no guilt.

Claims for violation of California Business and Professions Code Section 17200, violation of Section 13(A) of the Investment Company Act of 1944, breach of contract, intentional interference with contractual relations and breach of fiduciary duty are not covered under the settlement agreement, according to the press release.

Investors Robert Levin and Karl Kyzer filed their second amended complaint in the U.S. District Court for the Northern District of California on behalf of all those who purchased shares of the Schwab YieldPlus Fund, which was sold in two classes of shares:  investor shares and select shares.

The investors allege that in addition to the claims not covered under the settlement agreement, Schwab, subsidiaries Charles Schwab & Co. Inc., Charles Schwab Investment Management Inc. and Schwab Investments violated Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 by issuing a series of false and misleading statements concealing Schwab’s business and financial condition in connection with its subprime exposure.

[Editor's Note:  Full coverage will be in the April issue of the LexisNexis Financial Services Litigation Report.  For all of your legal news needs, please visit]
For more information, call editor Timothy J. Raub at 610-205-1127, or e-mail him at