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Broker Charles Schwab pays $187 million for misleading clients

2022-06-13T18:08:32.821Z


The SEC faults three of the company's subsidiaries "for failing to disclose that they allocate client funds in a manner that is less profitable for their clients under most market conditions."


Online broker Charles Schwab on Monday agreed to pay $187 million to settle a lawsuit from the US Securities and Exchange Commission (SEC), which accused him of misleading some clients about the allocation of their investments .

The SEC blames three of the company's subsidiaries "

for not disclosing that they allocate client funds in a way that their own internal analyzes have found to be less profitable for their clients under most market conditions

" , details a press release.

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Between March 2015 and November 2018, the company claimed that the amount of money kept in cash in their portfolios managed automatically by robo-advisors was decided according to “

a disciplined methodology

” in order to generate “

optimal returns

”.

But it was determined that "

under most market conditions

" money kept in cash would have earned them more if invested otherwise, the SEC says.

Charles Schwab, on the other hand, made a profit by using the money to lend it to other clients and pocket the difference between the interest earned on the loans and the interest paid to the owners of automated portfolios.

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$52 million in restitution of interest to customers and a fine of $135 million

"

Schwab's conduct has been outrageous and today's action sends a clear signal to advisors that they need to be transparent with clients about hidden fees and how those fees affect their returns

," Gurbir Grewal commented. , an SEC official, in the statement.

Charles Schwab, who neither admitted nor denied the SEC charges, agreed to pay $52 million in disgorgement of client interest and a $135 million fine.

The group said they were "

satisfied to put [this affair] behind [him]

".

We believe that resolving the issue in this way is in the best interests of our customers, our company and our shareholders, as it allows us to stay focused.

on helping customers, is it added in a press release.

Charles Schwab had already set aside $200 million to settle this case.

Source: lefigaro

All business articles on 2022-06-13

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