Schwab Yield Plus Arbitration Award Issued for $542,340

An investor who lost money in the Schwab YieldPlus fund was awarded $542,340 as part of an arbitration claim filed against his broker.

Schwab YieldPlus is an ultra-short bond fund sold by Charles Schwab as an alternative to cash or money market funds. It was designed to generate income with minimal changes in share price. However, investors experienced losses of over 30% this year as a result of heavy exposure to risky subprime mortgage-backed securities.

Like thousands of other investors, Jeffrey Nielson filed an arbitration claim through the Financial Industry Regulator Agency (FINRA) to recover his losses based on misrepresentations and false statements about the extent of risk associated with the fund.

Nielson claimed that he purchased shares of Schwab YieldPlus based on the recommendations of his broker. However, he alleged that the broker failed to disclose that over half of the funds assets were in illiquid mortgage backed securities and also failed to disclose that it was a proprietary fund.

The Financial Industry Regulatory Authority (FINRA) oversees the activities of 5,000 brokerage firms throughout the United States. In the event of a dispute between an investor and a broker, most brokerage agreements require FINRA arbitration instead of lawsuits through the court system.

The arbitration panel awarded over half a million dollars to Nielson, in what is believed to be the second such Schwab YieldPlus arbitration result as a result of the collapse of this fund. According to InvestmentNews.com, the other Schwab YieldPlus arbitration claim also resulted in an award in favor of the investor, which much less significant losses of $18,425.

In the coming months, it is expected that hundreds of other claims with be decided by arbitration panels if Schwab does not reach a settlement for YieldPlus investors. In addition, financial fraud lawyers are continuing to review cases for individuals who have lost as little as $10,000 of their investments in Schwab YieldPlus Fund Investor Shares (SWYSX) and Schwab YieldPlus Fund Select Shares (SWYPX).