Once regarded as the retail investors’ friend, and somehow different from other fee-driven brokerage firms, Charles Schwab has been battling retail investors who were sold the Schwab YieldPlus Fund as a cash-equivalent investment, similar to a money market fund. The Schwab YieldPlus Fund has lost approximately half its value as a result of undisclosed, high-risk non-conventional investments. Schwab now has another black mark on its investor friendly image ? deceptive sales of Lehman Brothers “100% Principal Protected” Notes.
It has been widely reported that UBS deceptively marketed and sold Lehman Brothers “100% Principal Protected” Notes as suitable investment for faint-hearted investors who did not want to put their principal at risk. But until recently, nothing public about similar sales made by Schwab.
A claim recently filed against Schwab by a retired Florida couple recounts how they were sold tow of these supposedly principal-protected investments. They were reportedly solicited by Schwab’s “Strategic Trading Group.” In telephone calls and emails, Schwab recommended the Lehman Brothers principal-protected notes as safe investments, and advised the couple that the worst that could happen was they would get their money back. The falsity of such assertion was revealed when Lehman Brothers filed bankruptcy in September 2008. Like UBS, Schwab apparently did not disclose that the investments were nothing more than unsecured claims on Lehman’s assets that could 100% vanish.
Last week, New Hampshire regulators ordered UBS to cease and desist from selling structured products and charged it with engaging in sales and supervisory violations. In addition, investors have filed arbitration claims against UBS to recover their losses. The claims allege, among other things, that UBS did not provide any analysis of Lehman’s creditworthiness or the relevance of its creditworthiness, and did not disclose that the notes were merely unsecured claims on Lehman’s assets. It now appears that Charles Schwab & Co. engaged in similar acts.
Many investors are retirees or on the verge of retirement, or were defensive on the market, and were attracted by promises of higher yields plus principal protection, according to the article. J. Boyd Page, senior partner at Page Perry in Atlanta, observed “This is one of the more outrageous situations we have seen recently. Questions regarding Lehman’s financial viability have been known for months. How anyone could sell Lehman securities as ‘safe money’ is simply appalling.”
Investors who were sold structured products issued by Lehman Brothers, Freddie Mac or Fannie Mae by UBS or other brokerage firms based on representations that they were conservative investments have compelling claims to recoup their losses.
Page Perry is an Atlanta-based law firm with over 125 years collective experience representing investors in securities-related litigation and arbitration. While past results are not indicative of future success, Page Perry’s attorneys have recovered over $1,000,000 for clients on more than 30 occasions. Page Perry’s attorneys are actively involved in representing individual and institutional investors regarding their investments in Lehman notes and similar structured products. For further information, please contact us.