SEC Slaps Charles Schwab on the Wrist

     SAN FRANCISCO (CN) – In the wake of lawsuits over Charles Schwab’s management of its YieldPlus mutual fund, the SEC filed a cease-and-desist order imposing sanctions agreed to by the investment firm. The sanctions do not involve financial penalties.




     Formed in 1999, the YieldPlus fund had $13.5 billion in assets at its peak in 2007. It crashed during the 2007-2008 credit crisis and its assets fell to $1.8 billion.
     The SEC alleged several violations, including Schwab’s deviation from the fund’s stated policy, “when it invested more than 25% of fund assets in non-agency mortgage-backed securities without obtaining a shareholder vote as required by statute.”
     Schwab also issued made “misrepresentations during the fund’s decline,” issued inaccurate statements about the fund and failed to establish internal controls “designed to prevent the misuse of material nonpublic information,” according to the SEC order.
     Schwab has agreed to retain an independent consultant to conduct a comprehensive review of its policies and practices and to report back to the SEC within 90 days. The firm will then adopt all recommendations in the consultant’s report and must demonstrate compliance supported by exhibits.
     The agreement also requires Schwab to “cease and desist from committing or causing any violations and any future violations” of the Securities Act and the Exchange Act.

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