Charles Schwab & Co. was ordered to pay $3.8 million to 13 clients — primarily retired teachers — due to breach of contract and breach of fiduciary duty related to structured products and complex ETFs.
An all-public FINRA arbitration panel in Jacksonville, Florida, ordered Schwab on Tuesday to pay $3,223,666 in compensatory damages, $532,455 in prejudgment interest and $77,509 in costs to 13 claimants who also asserted professional negligence and unjust enrichment.
The causes of action related to claimants' allegation that Schwab "substantially concentrated their accounts in inappropriate holdings, including complex Structured Products, complex Non-Traditional and Leveraged Exchange Traded Funds, and conflicted and proprietary ETFs," the award order states.
"It's a full award of damages and losses that investors suffered in the structured products," Michael Bixby, founder of Bixby Law in Pensacola, Florida, who represented the clients, told ThinkAdvisor in a phone interview. The investors were "primiarily retired teachers, most in their late 60s," he said.
Claimants alleged that Schwab "knew or should have known that the investments and strategy implemented in their accounts were being misrepresented," the order states.
Schwab requested that the complaint be dismissed, according to the order.
Under FINRA Rule 9554, respondents have 30 calendar days from the date of service to pay the award or file in court to vacate it, Michael Edmiston, an attorney with Jonathan W. Evans & Associates, and a past president of the Public Investors Arbitration Bar Association, told ThinkAdvisor Wednesday in an email.
Credit: Diego M. Raszinschi/ALM
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