More On Legal & Compliancefrom The Advisor's Professional Library
- Privacy Policies and Rules Whether an RIA is SEC or state-registered, the firm must have policies and procedures in effect to protect clients privacy. Policies and procedures should explicitly require an RIA to send out its privacy notice each year.
- Conducting Due Diligence of Sub-Advisors and Third-Party Advisors Engaging in due-diligence of sub-advisors isnt just a recommended best practice it is part of the fiduciary obligation to a client. An RIA should be extremely reluctant to enter a relationship with a sub-advisor who claims the firms strategy is proprietary.
And on it goes. A class action suit brought by plaintiffs’ attorneys against Charles Schwab & Co. over the investment giant’s YieldPlus Fund appears to be settled.
The suit stems from investments contained within the YieldPlus portfolio, which included mortgage-backed securities and other credit instruments that declined significantly during the worldwide economic crisis beginning in late 2007.
“Schwab met with the plaintiffs’ attorneys and reached an agreement,” said Schwab spokesperson Greg Gable. “We had a hearing Thursday and the judge said he will rule on the agreement sometime soon, which we believe might be early next week.”
The case has been marked by on-again, off-again agreements between the two parties. The most recent agreement was called off by Schwab on Nov. 8 when the company notified the court it was backing out.
Schwab said it notified counsel for the plaintiffs that it was backing out of the agreement because plaintiff lawyers claimed the settlement was not all-encompassing, and they still had legal right to sue the company on behalf of other investors.
According to Schwab, in the spring of 2010 it agreed to a settlement of $235 million to settle all claims in the YieldPlus class action proceedings, regardless of their merit. Schwab said it was fully prepared to contest the allegations at trial but “wanted to provide significant and speedy financial benefit to valued clients who purchased or held the fund during the period covered by the lawsuit and to put the matter behind us.” Plaintiffs' lawyers at the time praised the settlement as one in which clients would receive "real money" and "a high percentage of recovery."
The company argues that until the credit crisis, the YieldPlus Fund was consistently one of the best performing funds in its category for eight years and held a Morningstar 5-star rating from December 2004 through September 2007. Even in the face of the credit crisis, the company notes YieldPlus shareholders lost, on average, only 7.5% of their investment when dividends are counted.