8-KOther Events

SCHWAB CHARLES CORP 8-K Report, Corporate Update (Oct 14, 2009)

Filed October 14, 2009For Securities:SCHWSCHW-PDSCHW-PJ

Summary

The Charles Schwab Corporation (SCHW) filed an 8-K on October 14, 2009, to disclose a significant development in ongoing civil litigation and regulatory investigations. Specifically, the company received a Wells notice from the U.S. Securities and Exchange Commission (SEC) staff. This notice indicates the SEC staff's intention to recommend the filing of a civil enforcement action against various Schwab entities and the president of two fixed income mutual funds, the Schwab YieldPlus Fund® and the Schwab Total Bond Market Fund™. The potential violations relate to the company's management of these two funds. A Wells notice is a preliminary step, allowing the company an opportunity to present its case before any formal charges are decided by the SEC. Schwab has stated its intention to respond to the notice, arguing against the merits of any potential enforcement charges.

Key Highlights

  • 1Schwab received a Wells notice from the SEC staff regarding two fixed income mutual funds: Schwab YieldPlus Fund® and Schwab Total Bond Market Fund™.
  • 2The SEC staff intends to recommend a civil enforcement action against Schwab Investments, Charles Schwab Investment Management, Charles Schwab & Co., Inc., and the president of the funds.
  • 3The potential violations cited are related to the management of these two fixed income mutual funds.
  • 4A Wells notice is not a formal allegation or finding of wrongdoing but an opportunity for the recipient to respond before a final decision on enforcement.
  • 5Schwab intends to respond to the Wells notice to present its argument against the proposed enforcement charges.
  • 6The company has been actively responding to civil litigation claims and regulatory investigations concerning these funds prior to this notice.

Frequently Asked Questions

A Wells notice is a communication from the staff of the U.S. Securities and Exchange Commission (SEC) informing a party that the staff has completed its investigation and intends to recommend that the Commission authorize an enforcement action against that party. It provides the recipient with an opportunity to present their side of the story and explain why such action should not be taken.

The SEC's investigation and potential enforcement action concern two fixed income mutual funds: the Schwab YieldPlus Fund® and the Schwab Total Bond Market Fund™.

The Charles Schwab Corporation has stated that it intends to respond to the Wells notice and explain why it believes enforcement charges are unwarranted. This indicates a proactive stance in defending against the potential allegations.

No, receiving a Wells notice does not mean Schwab has been found guilty. It is a preliminary step in the SEC's process, indicating the staff's intent to recommend charges. The recipient has the opportunity to respond and persuade the SEC not to proceed with formal action.