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Regulation and Compliance > Federal Regulation > SEC

Schwab Settles SEC Suit on Reporting Failure

By Joel Rosenblatt

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(Photo: AP)

Charles Schwab Corp. said it settled a lawsuit with the Securities and Exchange Commission over claims the company failed to file reports on suspicious transactions by independent investment advisors that Schwab terminated from its platform.

The lawsuit, filed Monday in San Francisco federal court, claims Schwab failed to file suspicious activity reports, or SARs, in 2012 and 2013 on the advisors, who weren’t employees of Schwab or affiliated with the financial-services firm.

Mayura Hooper, a spokeswoman for San Francisco-based Schwab, said the company settled with the SEC without providing terms.

“We appreciate the SEC completing its review of this matter and look forward to putting it behind us,” Hooper said in an emailed statement.

Chris Carofine, a spokesman for the SEC, couldn’t immediately comment.

In those two years, Schwab terminated its business relationship with 83 advisors, with a combined total of $1.62 billion in assets under management and almost 18,000 accounts, according to the complaint. Schwab concluded they had violated its internal policies and presented risk to the firm.

At least 47 of those engaged in transactions that Schwab had reason to suspect were suspicious, the SEC said in the complaint. Schwab filed SARs related to only 10 of them, the SEC said, failing to file reports on the remaining 37 terminated advisors.

The case is U.S. Securities and Exchange Commission v. Charles Schwab, No. 18-cv-3942, U.S. District Court for the Northern District of California (San Francisco).

— Check out ETFs Are Millennials’ Product of Choice: Schwab on ThinkAdvisor.

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