More On Legal & Compliancefrom The Advisor's Professional Library
- Do’s and Don’ts of Advisory Contracts In preparation for a compliance exam, securities regulators typically will ask to see copies of an RIAs advisory agreements. An RIA must be able to produce requested contracts and the contracts must comply with applicable SEC or state rules.
- The Few and the Proud: Chief Compliance Officers CCOs make significant contributions to success of an RIA, designing and implementing compliance programs that prevent, detect and correct securities law violations. When major compliance problems occur at firms, CCOs will likely receive regulatory consequences.
Charles Schwab Corp. filed suit against units of Bank of America Corp.'s Merrill Lynch & Co., UBS AG and Bear Stearns Cos. in state court on June 29 in San Francisco, where Schwab is based. The suit alleges that the banks lied or omitted information on mortgage-backed securities Schwab bought from them. The suit was first reported by Bloomberg on July 14.
The news service reports Schwab, an independent online broker, claims it paid the firms $130 million for three securities, and that more dubious securities are likely to turn up if the suit is allowed to go forward.
The company claims the securities dealers lied or didn't disclose information about loans underlying the bonds they sold, including the loan- to-value ratios of mortgages and the number of properties that were not primary residences, according to the complaint.
A Schwab spokesman did not return calls seeking comment.
However, Bill Halldin, a Bank of America spokesman, told Bloomberg the securities Merrill Lynch issued that are identified in the suit are "performing well, are not in default, and therefore we don't believe there's any basis for the complaint."
In the suit, Schwab said that when the dealers offered and sold the securities, they "made numerous statements to Schwab about the certificates and the credit quality of the mortgage loans that back them" that were "untrue" or "omitted," according to the complaint. Schwab also said the firms weren't truthful about how much they departed from their own standards in making the loans.