MAY 12, 2009
Charles Schwab offers two programs to investors who are interested in obtaining and paying for more comprehensive advice with respect to managing their investment portfolios. The "Schwab Private Client" program assigns a Charles Schwab Financial Consultant to the client who works with a Portfolio Consultant to provide "customized guidance that reflects your unique situation and goals" and make ". . . fact-based recommendations . . ." to the client. Charles Schwab website excerpt as of March 30, 2009. This service is available for an annual asset-based fee that presently starts at 0.75% for equities and 0.50% for fixed income investments.
Charles Schwab also offers a "Schwab Managed Portfolios" program to its clients. Charles Schwab investment professionals design a diversified asset portfolio consisting of Schwab and/or non-Schwab mutual funds to match the client's needs and risk tolerance. After the portfolio has been designed, the portfolio managers monitor the performance of the portfolio, replacing low-rated funds and engaging in asset class rebalancing as needed. According to information about Schwab Managed Portfolios on the Charles Schwab website, portfolio managers rely upon recommendations from the Schwab Center for Financial Research in designing and restructuring the client's managed portfolio. Charles Schwab clients presently pay fees that start at 0.50% of the first $250,000 of the client's non-cash assets in their portfolio, 0.35% for the next $250,000 in assets, and 0.25% for all assets that exceed $500,000.
Charles Schwab has never indicated that the interests of its regular retail clients might be subordinated to the interests of its clients participating in its Schwab Private Client and Schwab Managed Portfolio programs.
The stunning collapse of the Schwab YieldPlus ultrashort bond fund from June 2007 (Net Asset Value ("NAV") - $9.67 per share on June 29, 2007) through April 30, 2009 (NAV - $4.65, down 51.9%) has been commented upon at great length by financial journalists, attorneys and investors in internet posts. This collapse resulted from the fund's exposure to the riskier and higher yielding asset-backed and mortgage-backed securities segments of the ultrashort term fixed income market. When the fund started to experience huge redemptions in August 2007, the fund was forced to sell illiquid asset-backed and mortgage-backed securities at distressed prices. These sales resulted in realized and unrealized losses and a lower NAV price which prompted more and more redemptions and distressed sales of illiquid securities throughout the remainder of 2007 and in 2008. The total assets managed by the fund has plummeted from $13.491 billion on July 31, 2007 to $159 million as of March 31, 2009 (down 98.8%).
The steepest decline in the Schwab YieldPlus Fund's NAV took place from January 31, 2008 through April 1, 2008. This decrease coincides with the time period that the portfolio managers of the Schwab Retirement Income Fund and four of the Schwab Target Funds inflicted irreparable damage upon Schwab YieldPlus shareholders by secretly dumping a total of almost 3 million Schwab YieldPlus Fund shares from these funds' respective portfolios.
On January 31, 2008, the Schwab YieldPlus Fund NAV closed at $8.93 per share (a decline of a little less than 10% from the Summer 2007 price). On April 1, 2008, Charles Schwab posted the following notice on its website: "Several Schwab Funds have redeemed shares of the Schwab YieldPlus Fund. On April 1, 2008, the Schwab Retirement Income Fund redeemed its last remaining shares, resulting in Schwab Funds no longer holding the Schwab YieldPlus Fund." The Schwab YieldPlus Fund closed at $6.80 per share on that day, down (-27.82%) from the fund's June 29, 2007 NAV of $9.67 and down (-21.84%) from January 31, 2008, the date that the Schwab Retirement Income Fund and the four other Schwab Funds collectively held almost 3 million shares of the fund.
Members of our team who are representing Schwab YieldPlus Fund investors (Tom Shine, Chris Vernon, Tom Mauriello, Tim Dennin and Chris Bebel) have spoken to over 100 Schwab YieldPlus Fund investors who have sustained significant losses in the fund. Many of these investors are now represented by our legal team. Based upon our interviews with Schwab YieldPlus Fund investors, we know that Charles Schwab financial consultants and fixed income specialists were widely soliciting and recommending the fund to Charles Schwab customers. We also know that Charles Schwab was aggressively marketing the fund to all of its customers on its website, in press releases and in its investor newsletters. It is statistically improbable that we have not yet been contacted by a single Charles Schwab Private Client or Schwab Managed Portfolio client, unless these clients were advised to sell their shares in the fund in sufficient time to incur more modest losses relative to those who were not advised.
The following schedule demonstrates how Schwab YieldPlus Fund investors' losses accelerated very quickly in March of 2008, immediately prior to Charles Schwab's April 1, 2008 announcement that the Schwab Retirement Income Fund and other Schwab proprietary funds had sold all of their Schwab YieldPlus Fund shares. The June 29, 2007 NAV was selected as the base date because the fund's NAV price had not yet been affected by the redemptions that were to take place in August 2007.
SWYSX Decline Decline
NAV From From
Dates Price 6/30/07 1/31/08
6/29/07 $9.67
12/31/07 $9.07 -6.20%
1/31/08 $8.93 -7.65% Schwab Funds own 2.9 MM sh.
2/7/08 $8.93 -7.65% No change
2/14/08 $8.89 -8.07% -0.56%
2/21/08 $8.86 -8.38% -0.78%
2/28/08 $8.83 -8.69% -1.12%
2/29/08 $8.79 -9.10% -1.57%
3/3/08 $8.83 -9.62% -2.13%
3/4/08 $8.68 -10.24% -2.80%
3/6/08 $8.47 -12.41% -5.15%
3/10/08 $8.19 -15.31% -8.29%
3/7/08 $8.39 -13.24% -6.05%
3/13/08 $8.06 -16.65% -9.74%
3/20/08 $7.76 -19.75% -13.10%
4/1/08 $6.98 -27.82% -21.84% Schwab Funds completely
out of Schwab YieldPlus Fund
We are continuing to investigate reports, including acknowledgments after the fact by Charles Schwab employees, that Charles Schwab advised substantial numbers of its Schwab Private Clients to sell the Schwab YieldPlus Fund well in advance of April 2008.
As part of our continuing investigation, we are now specifically investigating potential claims by Schwab Private Clients and Schwab Managed Portfolio Program participants. We expect that many of these participants also lost significant amounts of money in the Schwab YieldPlus Fund despite the fact that they may have sold the fund earlier than Charles Schwab's other retail clients.
Our contact information follows:
Thomas F. Shine, Esq.
114 Sixth Avenue, Suite 4
Indialantic, FL 32903
Email - tfshine@aol.com
Website - www.thomasfshinelaw.com
(w) (321) 724-4445
Thomas D. Mauriello, Esq.
209 Avenida Fabricante, Ste. 125
San Clemente, CA 92672
Email - tomm@maurlaw.com
Website - www.maurlaw.com
(w) (949) 542-3555
Christopher T. Vernon
Vernon Healy, Attorneys At Law
3080 Tamiami Trail East
Naples, FL 34112
Email - cvernon@vernonhealy.com
Website - www.vernonhealy.com
(w) (239) 649-5390
Christopher J. Bebel, Esq.
900 Rockmead Drive, Suite 147
Houston, TX 77339
Email - ChrisBebel@aol.com
Website - www.chrisbebel.com
(w) (281) 348-2572
Timothy J. Dennin, Esq.
316 Main Street
Northport, NY 11768
Email - secatty@denninlaw.com
Website - www.denninlaw.com
(w) (631) 261-0250
Charles Schwab offers two programs to investors who are interested in obtaining and paying for more comprehensive advice with respect to managing their investment portfolios. The "Schwab Private Client" program assigns a Charles Schwab Financial Consultant to the client who works with a Portfolio Consultant to provide "customized guidance that reflects your unique situation and goals" and make ". . . fact-based recommendations . . ." to the client. Charles Schwab website excerpt as of March 30, 2009. This service is available for an annual asset-based fee that presently starts at 0.75% for equities and 0.50% for fixed income investments.
Charles Schwab also offers a "Schwab Managed Portfolios" program to its clients. Charles Schwab investment professionals design a diversified asset portfolio consisting of Schwab and/or non-Schwab mutual funds to match the client's needs and risk tolerance. After the portfolio has been designed, the portfolio managers monitor the performance of the portfolio, replacing low-rated funds and engaging in asset class rebalancing as needed. According to information about Schwab Managed Portfolios on the Charles Schwab website, portfolio managers rely upon recommendations from the Schwab Center for Financial Research in designing and restructuring the client's managed portfolio. Charles Schwab clients presently pay fees that start at 0.50% of the first $250,000 of the client's non-cash assets in their portfolio, 0.35% for the next $250,000 in assets, and 0.25% for all assets that exceed $500,000.
Charles Schwab has never indicated that the interests of its regular retail clients might be subordinated to the interests of its clients participating in its Schwab Private Client and Schwab Managed Portfolio programs.
The stunning collapse of the Schwab YieldPlus ultrashort bond fund from June 2007 (Net Asset Value ("NAV") - $9.67 per share on June 29, 2007) through April 30, 2009 (NAV - $4.65, down 51.9%) has been commented upon at great length by financial journalists, attorneys and investors in internet posts. This collapse resulted from the fund's exposure to the riskier and higher yielding asset-backed and mortgage-backed securities segments of the ultrashort term fixed income market. When the fund started to experience huge redemptions in August 2007, the fund was forced to sell illiquid asset-backed and mortgage-backed securities at distressed prices. These sales resulted in realized and unrealized losses and a lower NAV price which prompted more and more redemptions and distressed sales of illiquid securities throughout the remainder of 2007 and in 2008. The total assets managed by the fund has plummeted from $13.491 billion on July 31, 2007 to $159 million as of March 31, 2009 (down 98.8%).
The steepest decline in the Schwab YieldPlus Fund's NAV took place from January 31, 2008 through April 1, 2008. This decrease coincides with the time period that the portfolio managers of the Schwab Retirement Income Fund and four of the Schwab Target Funds inflicted irreparable damage upon Schwab YieldPlus shareholders by secretly dumping a total of almost 3 million Schwab YieldPlus Fund shares from these funds' respective portfolios.
On January 31, 2008, the Schwab YieldPlus Fund NAV closed at $8.93 per share (a decline of a little less than 10% from the Summer 2007 price). On April 1, 2008, Charles Schwab posted the following notice on its website: "Several Schwab Funds have redeemed shares of the Schwab YieldPlus Fund. On April 1, 2008, the Schwab Retirement Income Fund redeemed its last remaining shares, resulting in Schwab Funds no longer holding the Schwab YieldPlus Fund." The Schwab YieldPlus Fund closed at $6.80 per share on that day, down (-27.82%) from the fund's June 29, 2007 NAV of $9.67 and down (-21.84%) from January 31, 2008, the date that the Schwab Retirement Income Fund and the four other Schwab Funds collectively held almost 3 million shares of the fund.
Members of our team who are representing Schwab YieldPlus Fund investors (Tom Shine, Chris Vernon, Tom Mauriello, Tim Dennin and Chris Bebel) have spoken to over 100 Schwab YieldPlus Fund investors who have sustained significant losses in the fund. Many of these investors are now represented by our legal team. Based upon our interviews with Schwab YieldPlus Fund investors, we know that Charles Schwab financial consultants and fixed income specialists were widely soliciting and recommending the fund to Charles Schwab customers. We also know that Charles Schwab was aggressively marketing the fund to all of its customers on its website, in press releases and in its investor newsletters. It is statistically improbable that we have not yet been contacted by a single Charles Schwab Private Client or Schwab Managed Portfolio client, unless these clients were advised to sell their shares in the fund in sufficient time to incur more modest losses relative to those who were not advised.
The following schedule demonstrates how Schwab YieldPlus Fund investors' losses accelerated very quickly in March of 2008, immediately prior to Charles Schwab's April 1, 2008 announcement that the Schwab Retirement Income Fund and other Schwab proprietary funds had sold all of their Schwab YieldPlus Fund shares. The June 29, 2007 NAV was selected as the base date because the fund's NAV price had not yet been affected by the redemptions that were to take place in August 2007.
SWYSX Decline Decline
NAV From From
Dates Price 6/30/07 1/31/08
6/29/07 $9.67
12/31/07 $9.07 -6.20%
1/31/08 $8.93 -7.65% Schwab Funds own 2.9 MM sh.
2/7/08 $8.93 -7.65% No change
2/14/08 $8.89 -8.07% -0.56%
2/21/08 $8.86 -8.38% -0.78%
2/28/08 $8.83 -8.69% -1.12%
2/29/08 $8.79 -9.10% -1.57%
3/3/08 $8.83 -9.62% -2.13%
3/4/08 $8.68 -10.24% -2.80%
3/6/08 $8.47 -12.41% -5.15%
3/10/08 $8.19 -15.31% -8.29%
3/7/08 $8.39 -13.24% -6.05%
3/13/08 $8.06 -16.65% -9.74%
3/20/08 $7.76 -19.75% -13.10%
4/1/08 $6.98 -27.82% -21.84% Schwab Funds completely
out of Schwab YieldPlus Fund
We are continuing to investigate reports, including acknowledgments after the fact by Charles Schwab employees, that Charles Schwab advised substantial numbers of its Schwab Private Clients to sell the Schwab YieldPlus Fund well in advance of April 2008.
As part of our continuing investigation, we are now specifically investigating potential claims by Schwab Private Clients and Schwab Managed Portfolio Program participants. We expect that many of these participants also lost significant amounts of money in the Schwab YieldPlus Fund despite the fact that they may have sold the fund earlier than Charles Schwab's other retail clients.
Our contact information follows:
Thomas F. Shine, Esq.
114 Sixth Avenue, Suite 4
Indialantic, FL 32903
Email - tfshine@aol.com
Website - www.thomasfshinelaw.com
(w) (321) 724-4445
Thomas D. Mauriello, Esq.
209 Avenida Fabricante, Ste. 125
San Clemente, CA 92672
Email - tomm@maurlaw.com
Website - www.maurlaw.com
(w) (949) 542-3555
Christopher T. Vernon
Vernon Healy, Attorneys At Law
3080 Tamiami Trail East
Naples, FL 34112
Email - cvernon@vernonhealy.com
Website - www.vernonhealy.com
(w) (239) 649-5390
Christopher J. Bebel, Esq.
900 Rockmead Drive, Suite 147
Houston, TX 77339
Email - ChrisBebel@aol.com
Website - www.chrisbebel.com
(w) (281) 348-2572
Timothy J. Dennin, Esq.
316 Main Street
Northport, NY 11768
Email - secatty@denninlaw.com
Website - www.denninlaw.com
(w) (631) 261-0250
