Colling, Gilbert, Wright & Carter Securites Fraud

Class Actions typically make plenty of money for the class action attorneys but leave the investor-plaintiffs frustrated and disappointed. Worse, you may be part of a class action and not even realize it. Such is the case with the current Morgan Keegan class action as well as the potential class actions that have been filed on behalf of Charles Schwab YieldPlus investors around the country.

In typical class action cases, the fund purchasers are automatically included in the class action case unless they explicitly "opts" out of the class action. Unfortunately, investors receive a very thick notice filled with undecipherable legal terms and mega-small print, they often set it aside or throw it away. After the deadline for opting out of the class has passed, the investors are forever barred from filing an individual claim and must live with their individual portion of any class settlement. The investor no longer has the right to recover losses through FINRA (formerly known as the NASD) arbitration process. Class action settlement will likely result in a very disappointing result for investors. The typical class action recovery is about 5 to 7 cents on the dollar for each dollar lost. Therefore, if you do not want to unwittingly drawn into a class action suit, you must affirmatively opt out of the class action(s). The attorneys at Colling, Gilbert, Wright & Carter can explain your options and assist you in making the decision that is appropriate for your individual circumstances.

Charles Schwab Corp.'s first-quarter profit rose 12 percent, the firm's best first quarter performance ever, earning $305 million. Revenue during the period climbed 13 percent to $1.31 billion from $1.15 billion.

Schwab opened 246,000 in the first quarter of this year with more than $41 billion in deposits. This despite the fact Schwab YieldPlus, a mutual fund marketed as a slightly higher yielding alternative to money market accounts with a slightly higher risk profile. However the fund managers, unknown to purchasers, invested a large portion of its assets in mortgage-backed securities which began to hemorage last summer as a result of morgage failures and the overall nationwide credit crisis.

The unexpected losses in Schwab YieldPlus prompted unwary investors to start redeeming shares in mass, forcing the fund managers to sell fund assets at sharply discounted prices. At its high point, the YieldPlus fund had contained nearly $14 billion in assets. As a result of the mass exodus, the fund was valued at less than $1.5 billion, as of April, 2008.

Addding insult to injury, the Schwab YieldPlus fund now ranks as the nation's worst-performing "ultra-short" bond fund according to Morningstar, a well known and highly regarded mutual fund rating service.

At least two class action lawsuits have been filed on behalf of fund purchasers who allege they were misled about the fund's risk profile. However class actions settlements typically provide little in compensation for the aggrieved parties.

Also, Schwab has offered select clients "good will" payments believed to be in the one to twelve cents on the dollar loss range (see May 19 blog entry). This recent strategy is likely designed to salvage certain account relationships and reduce potential liability. However, many fund holders have been offerred nothing or an amount insufficient to persuade them to obsolve Schwab of all responsibility for their losses.

Which brings us to a third option, the filing of an individual arbitration claim. This option is avaialbe to all investors hoping to recoup more of their losses then will likely be achieved through class action participation or by accepting the Schwab offer of settlement.

Please contact our office to discuss your individual options for recovering losses related to Schwab YieldPlus. Thank you.

The word has been out since the end of last year. See the Memphis Flyer online article

The story has only gotten worse for those investors and Morgan Keegan appears to be taking a hard line approach with their former clients. To my knowledge none of the clients who lost upwards of 75% of their principal have been contacted and offered any kind of compensation. Rather the regional broker-dealer is bracing for class action lawsuits and individual arbitration claims on behalf of thousands of angry investors. While many short-term bond and high income funds have suffered losses related to sub-prime mortgage backed securities, Morgan Keegan/Regions has clearly set the bar for poor fund management and inadequate risk disclosure. Further, unlike at least one similarly situated fund company (see Charles Schwab blog entry), the Company has not made any attempt to compensate their clients for even a portion of their losses, leaving the class action suits or individual arbitration claims as the only investor recourse.

Please contact our offices toll free at (866) 352-3476 to discuss your options for recovering your losses.

The recent revelations that a number of funds marketed as relatively safe alternatives to money market contained collateralized debt and mortgage obligations as well as other "reset" type products, has left the sponsoring firms scrambling to do damage control and reduce potential liability. Among them is "semi-discounter" Charles Schwab who, through it's Client Advocacy desk, has been proactively contacting clients offering relatively small "good will gestures" to their clients whom experienced substantial losses in the company's YieldPlus short-term bond fund.

The following is an excerpt from the Friday, May 2, 2008 Wall Street Journal Article: "Schwab Seeks to Settle on Losing Fund"


Charles Schwab Corp. is offering settlements to investors in its Schwab YieldPlus Fund, a supposedly conservative fund that is down 26% this year. The offers represent pennies on the dollar for losses suffered by some investors, according to plaintiffs attorneys, who seek a class action against Schwab. Schwab declined to comment, citing pending litigation.

YieldPlus is an ultra-short bond fund that offered high yields, enticing investors and helping it grow rapidly. At its peak last year, it had more than $13 billion in assets. YieldPlus bet heavily on mortgage-related securities, and when those securities shrivelled from the subprime-mortgage crisis, so did the fund. Investors have been pulling out money; assets are down to $1.5 billion.

Fund companies typically have repaid investors who had losses in money-market funds. YieldPlus was not a money-market fund, but it was advertised as a vehicle for conservative investors looking for a slightly higher yield while preserving their capital.

In 2002, Heartland Advisors Inc. paid $14 million to settle a class action over two municipal-bond funds in which investors lost $60 million. In the 1990s, Paine Webber Group settled a class action over a roughly $2 billion fund that blew up on derivatives positions, giving more than $30 million in compensation.

In the case of YieldPlus, several suits seeking class-action status have been filed against San Francisco-based Schwab in U.S. district courts in New York, Massachusetts and California. Other law firms say they are investigating the fund.

Reports of Schwab's payout offers range from one cent to 12 cents or more for each dollar lost. Clients who take settlements generally are required to sign agreements that prevent them from joining outside litigation. Plaintiffs attorneys say Schwab may be offering settlements to avert a class action. Schwab, like most brokerages, requires investors to agree to binding arbitration in the event of many disputes. Plaintiffs attorneys say that doesn't apply to cases where the brokerage didn't adequately disclose risks. James Harp, an Irvine, Calif.-based investor acting on behalf of his wife, said a Schwab staffer told him he would be "making a 'grave' mistake" by trying to put "a timetable on a resolution if we can handle this claim without involving lawyers."

Apparently Schwab is attempting to wipe out as much potential liability as possible as cheaply as possible. We encourage investors who have been contacted by Schwab to contact our office to discuss their options for pursuing a greater recovery then what is being offered by Schwab. Call toll free (866) 352-3476.

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