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Bond Fund Investor win in Court
Old 04-11-2010, 04:41 AM   #1
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Bond Fund Investor win in Court

Sends a message to Mutual Fund Companies that stray from their investment polices.

Angry Schwab bond-fund customers win in court - Personal Finance blog - Money Magazine's More Money
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Old 04-11-2010, 06:16 AM   #2
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I particularly liked the parting shot:

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Old 04-11-2010, 07:32 AM   #3
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Very interesting article. Thanks for posting.

Audrey
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Old 04-11-2010, 07:47 AM   #4
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Yes, appreciate the link. Thanks.
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Old 04-11-2010, 12:30 PM   #5
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I do not do business with them... Never will now!

I had a Mutual Fund at one time with a different company that got caught allowing hedge funds to buy after shares after the market closed which enabled the hedge funds to arb. I immediately closed my account and moved my money. I got a court settlement later. The fund no longer exists.
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Old 04-14-2010, 04:51 PM   #6
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I have been a loyal Schwab customer for more than 25 years. Over the years they've delivered exceptional service. Unfortunately, my mom and I both invested in YieldPlus and lost around 10K which is remarkable for a low-risk short term bond fund.

Charles Schwab himself apologies about YieldPlus, but now that I finally understand what they did that caused the disaster the apology isn't cutting it. I hope Schwab does the right thing and pays back its customers.
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Old 04-14-2010, 08:30 PM   #7
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I guess what disturbed me was that Schwab tried to defend itself on a technical detail, saying it didn't violate the letter of its funds bylaws. Apparently, the court didn't agree, but even if it had, the spirit was clearly violated. It makes you wonder if any of the reams of stuff you are given in a prospectus is to protect YOU or only the company selling the product.

One thing is certain, Schwab will pay a price for this (and probably should pay a higher price). Since this was just one little piece of the "fall-out" of the whole mortgage-backed securities disaster, the greater financial "press" will probably let it get lost in the shuffle for the most part.
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Old 04-15-2010, 08:59 AM   #8
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Quote:
Originally Posted by chinaco View Post
Sends a message to Mutual Fund Companies that stray from their investment polices.

Angry Schwab bond-fund customers win in court - Personal Finance blog - Money Magazine's More Money
Doesn't surprise me...Schwab isn't as squeakly-clean as a lot of folks on here think they are..............
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Old 04-15-2010, 05:08 PM   #9
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Originally Posted by clifp View Post
I have been a loyal Schwab customer for more than 25 years. Over the years they've delivered exceptional service. Unfortunately, my mom and I both invested in YieldPlus and lost around 10K which is remarkable for a low-risk short term bond fund.

Charles Schwab himself apologies about YieldPlus, but now that I finally understand what they did that caused the disaster the apology isn't cutting it. I hope Schwab does the right thing and pays back its customers.
I've also been with Schwab many years with excellent results. Strictly self-managed other than having some questions regarding mechanics answered from time to time.

I've never had a position in YieldPlus, although I did look at it when it came out.

At this stage, this hasn't cost me anything and I'm otherwise totally satisfied with them as a brokerage house. It seems like it would be unlikely to have anything similar happen again in the near future. I'm not sure that pulling out to "punish" them wouldn't just be cutting off my nose to spite my face. And, at a minimum, it would be a ton of work to evaluate an alternative and execute the move.

I hope you are reimbursed.
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Old 04-15-2010, 05:36 PM   #10
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IMO - it is not a matter of punishment... it is more about trust. But you make a good point, why reward the behavior?
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Old 04-15-2010, 09:56 PM   #11
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If your post is in reference to mine..... I did not make that point.
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Old 04-16-2010, 04:04 AM   #12
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http://www.marketwatch.com/story/sch...k=MW_news_stmp

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Federal securities law claims asserted against the Bond Fund and company defendants in the same case remain pending. The company is preparing for a May 10, 2010 trial date and continues to believe it has strong defenses, especially in view of the global credit crisis, the fact that depressed market valuations and illiquidity were not limited to mortgage-backed securities and impacted other asset classes held by the Bond Fund to the same or an even greater extent, and the fact that the Bond Fund's holdings in mortgage-backed securities were widely disclosed, consistent with regulatory requirements and industry standards. Nevertheless, litigation and jury trials in particular are inherently unpredictable, and an adverse judgment could result in material liability to the company of as much as $890 million, the amount of damages plaintiffs have asserted relating to their federal securities law claims. The company has participated in several rounds of mediation with plaintiffs; at this time, however, the company is unable to determine whether further discussions with plaintiffs could result in a settlement before trial. At present, the company is unable to predict the outcome of proceedings on plaintiffs' federal securities law claims and therefore has not established a reserve for any potential liabilities in connection therewith. If a liability were incurred, in view of claims to date under applicable insurance policies, it is likely that such a liability would exceed available coverage.
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Old 04-16-2010, 06:50 PM   #13
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I have "punished" Schwab in that I no longer own their mutual funds (a token amount of Schwab Yield Plus). There low-cost no-commission ETFs they rolled out over the last few month would normally be a no brainer for me to purchase, but I am going to be cautious about investing in them until they have a track record.

BTW, a more accurate headline for the initial link, is Schwab bond customers don't lose in court, the court denied a summary judgment for the defendant. There is a long way before Yield Plus customer actually win and collect money.
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