SWIMMER LAW ASSOCIATES P.A. Files Schwab FINRA Arbitration Claim

Thu May 8, 2008 10:25am EDT

Swimmer Law Associates P.A. Files Schwab FINRA Arbitration Claim for Victims of the Schwab YieldPlus Fund Select Shares — SWYSX

Miami Beach, Florida, May 8, 2008 (NEWS RELEASE) — Swimmer Law Associates P.A announces that it has filed a FINRA arbitration claim on behalf of two clients of Charles Schwab & Co. for investment losses in the Schwab YieldPlus Fund Select Shares (SWYSX) today.

The FINRA arbitration statement of claim alleges fraud, negligence, misrepresentations and omissions related to the failure of the firm to fully disclose risks associated with the Schwab YieldPlus mutual funds, according to Aaron Swimmer, of Swimmer Law Associates P.A, in Miami Beach, Florida.

The claim seeks recovery of investment losses in excess of $265,000, along with attorney’s fees, interest and punitive damages.

According to Miami Beach securities attorney Aaron Swimmer, “Schwab clients in the YieldPlus funds thought they were getting the equivalent of a money market fund. Instead, they received a mutual fund concentrated in high risk, speculative, mortgage backed securities. The concentrated nature of the Schwab fund made it more like a hedge fund than the money market fund Schwab portrayed it to be to millions of investors.”

The FINRA statement of claim alleges that the YieldPlus fund prospectus made the following misleading or fraudulent misrepresentations: “The Schwab YieldPlus fund is an ultra short-term bond fund, designed to offer high current income with minimal changes in share price”; “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) … To help maintain share price stability and preserve investor capital, the fund seeks to maintain an average portfolio duration of one year or less”; and “The fund’s investment strategy is designed to offer higher yields than a money market fund while seeking minimal changes in share price.”

The statement of claim also alleges that the funds marketing material and statements by Yield Plus fund managers were materially misleading. For example, the statement of claim alleges, in a May 2007 interview with Bloomberg TV, Matt Hastings, co-manager of YieldPlus funds, said that, “The investors that we are trying to capture are money fund investors or investors that are defensive on the bond market.”

According to the statement of claim, while the average ultra short term bond fund has lost approximately 1.9% in the last 6 months, the YieldPlus funds have dropped 24%. The complaint alleges that, according to Yahoo! Finance, the YieldPlus fund, when compared to all other funds in its category, ranks the worst of 139 funds in the category for the one month, three month and six month time periods and among the worst for the one year and 3 year time periods.

The statement of claim filed by Swimmer Law Associates P.A. does not name Charles Schwab financial consultants, employees or the affiliated registered investment advisors.

According to Mr. Swimmer, “We believe that Schwab affiliated registered investment advisors and the Schwab employees who solicited the funds were victims of these products as well. In our view, the firm unfortunately misled the Schwab financial consultants and investment advisors and their clients ended up paying the ultimate financial price.”

Mr. Swimmer also warned, “Many law firms have filed class action lawsuits against Charles Schwab & Co.  Yield Plus clients are encouraged to analyze all of their legal options. Class action settlements too often lead to minimal settlements for clients. Charles Schwab YieldPlus victims must be aware that if they stay in the class action and recover, they cannot also recover in a FINRA arbitration action.”

More information is available by contacting:

Swimmer Law Associates, P.A.
Aaron Swimmer
1680 Michigan Avenue, Suite 1014
Miami Beach, Florida 33139