Charles Schwab Settles with SEC for $2.8 Million Regarding Failure to File Suspicious Activity Reports

The Securities and Exchange Commission (SEC) recently filed a civil complaint against Charles Schwab & Co., Inc., a San Francisco, California-based securities brokerage firm.  The SEC alleged that Charles Schwab failed to file Suspicious Activity Reports (SARs) on the suspicious transactions of independent investment advisers that it terminated from using Schwab to custody their client accounts.

The complaint alleges that in 2012 and 2013, Charles Schwab ended its relationship with 83 independent investment advisers for engaging in activity that Schwab determined violated its internal procedures and presented risk to Schwab or its customers.  The complaint further alleges that Schwab knew that at least 47 of these advisers’ activity required the filing of suspicious activity reports, but that it failed to do so for 37 of these advisers.  Some of the concerned activities included charging clients excessive advisory fees, potentially fraudulent transactions in the client accounts, and advisers posing as clients to effect transactions.  To settle these allegations, Charles Schwab agreed to pay a $2.8 million penalty.

This is not the first time that Charles Schwab has been in trouble regarding supervision of activities by independent investment advisers.  On October 17, 2005, the NYSE fined Schwab $1 million for failing to adequately supervise investment advisory accounts.  More specifically, the NYSE found that Schwab violated NYSE Rule 342(a) and (b) by “failing to establish and maintain appropriate procedures for supervision and control, including a separate system of follow-up and review, with respect to certain business activities relating to disbursement of customer assets from accounts managed by certain non-employee investment advisors and carried by Respondent Firm.”

Israels & Neuman is an investment fraud law firm with offices in Denver, Colorado; Seattle, Washington; and Ann Arbor, Michigan.  We represent clients in all 50 states, and we have previously represented over one thousand clients against securities brokerage firms, including many against Charles Schwab.

Click to view:  Charles-Schwab-NYSE-2005-Action.pdf Charles Schwab NYSE 2005 Action

Click to view:  Charles Schwab SEC Complaint

          If you lost money through an investment adviser that utilized Charles Schwab’s trading platform and want to discuss all legal options, please CONTACT ISRAELS & NEUMAN for a free consultation.

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