Charles Schwab has agreed to pay regulators about $119m to settle claims it wrongly marketed its short-term money-market fund YieldPlus to clients.
Schwab will pay the money to the Financial Industry Regulatory Authority and the Securities and Exchange Commission (SEC), as well as Illinois regulators.
Schwab expects to take an after-tax charge of $97m against its fourth-quarter earnings related to the settlement.
The agreement settles SEC allegations that Schwab made misleading statements regarding its YieldPlus Fund.
Separately, the SEC filed a complaint against Charles Schwab Investment Management’s former chief investment officer for fixed income Kimon Daifotis and Schwab executive vice president Randall Merk. Merk was president and a trustee of the YieldPlus fund.
According to the SEC allegations, Daifotis and Merk committed fraud and broke several securities laws in connection with marketing the fund.
Originally, the suit by YieldPlus investors claimed that they had lost $970m because of the fund’s mortgage investments.