All About Charles Schwab Lawsuits

Recently this year, Charles Schwab came under fire for terminating an employee who violated a company email policy, even though younger employees were not affected. The story, according to Financial Planning:

A former relationship manager is suing Charles Schwab for alleged age discrimination after the firm disciplined and fired her for allegedly violating company policy on email communications — punishment she claims younger colleagues didn’t face.

Monica Knowles, 63, started working at Schwab in 2014 as a senior relationship manager, according to the lawsuit, which was filed this week in a federal court in Michigan. The lawsuit states that she was the oldest person employed under her direct supervisor, a managing director not named in the lawsuit.

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In summer 2016, clients allegedly emailed Knowles about the enforcement of an SEC statute, according to the lawsuit, which did not specify the statute. That November, Schwab gave employees, including Knowles, talking points with which to address client questions about the topic.

Knowles subsequently paraphrased some of the talking points in an email answering a client’s questions about enforcement of the statute, according to the complaint. The client then posted that answer on a blog, according to the lawsuit.

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In August 2017, the managing director told Knowles he wanted her to leave Schwab by early September. In September, Schwab terminated Knowles. Knowles claims she was replaced with an employee under the age of 40.

A decade-old Charles Schwab lawsuit was finally settled in 2015, per Reuters. It involved the bank advertising auction-rate securities that eventually became illiquid:

NEW YORK, Feb 17 (Reuters) – Charles Schwab Corp has agreed to settle a 2009 lawsuit in which New York’s attorney general accused the discount brokerage of fraud in the sale and marketing to investors of auction-rate securities that became illiquid.

Terms were not disclosed in a settlement between Schwab and Attorney General Eric Schneiderman, which was made public in a Feb. 13 filing with the state Supreme Court in Manhattan.

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Many brokerages marketed the securities as being as safe as cash, but much of the debt became illiquid in February 2008 when dealers stopped supporting the market.

The lawsuit against Schwab was initially filed in August 2009 by Andrew Cuomo, then New York’s attorney general and now its governor.

Cuomo sued after having persuaded financial companies that sold or underwrote auction-rate securities to buy back more than $61 billion of the debt. Other brokerages to settle included Fidelity Investments and TD Ameritrade Holding Corp.

In another 2015 lawsuit filed against Charles Schwab, the institution was accused of illegally routing nearly all of its trades through one specific security firm. The Washington Examiner has this story:

SAN FRANCISCO (Legal Newsline) – A large brokerage firm is being accused of mishandling its clients’ money and routing most trades to a specific securities firm.

Louis Lim filed the lawsuit on May 8 in U.S. District Court in California against Charles Schwab, claiming the firm routed nearly 95 percent all of the clients’ non-directed orders to UBS Securities LLC.

The lawsuit claims Charles Schwab did this because of “legally binding Equities Order Handling Agreements” it had with UBS. The suit said Charles Schwab breached its fiduciary duties by directing funds to UBS, and it “violates Schwab’s duty of best execution.”

Lim is seeking class status for those who had non-directed orders handled by Charles Schwab, and is also seeking more than $5 million in damages plus court costs. Furthermore, the lawsuit seeks to prevent Charles Schwab from continuing to route nearly all of its non-directed orders to UBS.

In 2014, Charles Schwab settled on a class action suit after they failed to pay their consultants their deserved overtime pay, according to LawyersAndSettlements.com:

Los Angeles, CA: A $3.8 million settlement has been approved in the employment class action lawsuit pending against Charles Schwab & Co. The unpaid overtime lawsuit represents a potential class of financial consultants who allege they were misclassified and subsequently denied overtime.

The lawsuit claims Charles Schwab & Co violated the Fair Labor Standards Act by classifying its international CDT financial consultants and associate financial consultants as exempt from overtime pay. They are responsible for cross-selling financial products to existing brokerage and banking customers.

According to the complaint, the consultants alleged that they did not fall under any federal or California exemptions to overtime laws. They allege that they were encouraged by the defendant “to work beyond their scheduled shifts without compensation, failing to allow them to record overtime hours they worked and failing to compensate them for overtime hours they worked,”according to the complaint.

Just last year, Charles Schwab was sued by the U.S. Securities and Exchange Commission for failing to report suspicious transactions by investors years ago. This is the story, from Financial Advisor:

The U.S. Securities and Exchange Commission sued Charles Schwab Corp. over claims that the company failed to file reports on suspicious transactions by independent investment advisers that Schwab terminated from its platform.

The lawsuit, filed Monday in San Francisco federal court, claims Schwab’s adviser services division failed to file suspicious activity reports, or SARs, in 2012 and 2013. The advisers are independent and contract with Schwab and provide investment advice, according to the complaint. They aren’t employees of Schwab or affiliated with the financial-services firm.

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In those two years, Schwab terminated its business relationship with 83 advisers, with a combined total of $1.62 billion in assets under management and almost 18,000 accounts, according to the complaint. Schwab concluded they had violated its internal policies and presented risk to the firm. At least 47 of those engaged in transactions that Schwab had reason to suspect were suspicious, according to the complaint.