The securities law firm of Klayman & Toskes filed an arbitration claim seeking damages of $125,000 against Charles Schwab from the Financial Industry Regulatory Authority's office of dispute resolution, according to a release from the law firm.

In the past year, the Schwab Yield funds, YieldPlus and YieldPlus Select have all declined in value due to exposure to subprime related holdings and mismanagement of the funds.

According to Klayman & Tokes, Charles Schwab alleged misinformed investors regarding the state of these funds, omitting information regarding the funds’ concentration in the subprime market, which resulted in risk and exposure to MBS and related securities. Charles Schwab also supposedly offered false information about the risk tolerance and degree of diversification of these funds. 

The firm stated in its claim that Charles Schwab also failed to inform investors that the funds’ managers had over-concentrated the funds’ assets in various structured financial products. These securities remain illiquid and thin, and made these funds more like hedge funds rather than money market funds. 

Klayman & Tokes also mentioned that investors’ losses in Schwab’s YieldPlus Select fund are a direct result of Schwab’s false and misleading information, and the law firm is processing claims on behalf of investors who lost money in this fund. 

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