When Eliot Spitzer accused Wall Street analysts of questionable research practices, Charles Schwab Corp. sought to woo investors by setting itself apart from the herd.

However, the San Francisco brokerage has not escaped the New York Attorney General's latest crusade. Schwab revealed Friday in its quarterly filing with the Securities and Exchange Commission that Spitzer and the SEC are investigating allegations of market timing in Excelsior Funds, the fund family operated by its U.S. Trust Corp. unit, and for illegal late trading in Schwab Mutual Fund Marketplace, which sells over 4,000 funds from different providers.

The revelations are similar to those made by several other firms, but investors punished Schwab's stock more severely. On Friday, Schwab's stock lost nearly 8%, or $1.4 billion of its market value, while American Express Co. and PNC Financial Services Group Inc., which also said they are being investigated, lost around 1% apiece.

Schwab's losses continued on Monday, as its shares fell another 5% in early afternoon.

Analysts say that Schwab may have set itself up for a fall.

"For Schwab, which positioned itself as the white knight in the securities industry, to have some kind of blemish puts a bit of a ding in the image they tried to create," said Jeffrey Harte of Sandler O'Neill & Partners LP.

Last year Schwab ran an ad campaign that took aim at Merrill Lynch & Co. and others now being targeted by Spitzer. The ads portrayed Schwab as a more trustworthy alternative. The company has also started offering computer-generated and independent stock research.

Daniel Goldberg, an analyst with Bear Stearns Cos., said that because Schwab's brand has been pushed as one that can be associated with trust, the issue of market timing is more problematic.

"It's likely that a portion of Friday's big difference [in stock performances] is investors' recognition of the potential loss in brand value suffered by Schwab," Goldberg wrote in a research note.

But Harte also said that Schwab's stock may also be a victim of its own success in recent months. Shares of Schwab and other brokerages have climbed in recent months as a result of the market recovery; Schwab's stock hit a 52-week high at $14.20 on Oct. 15.

Some investors may be looking to take profits at the first sign of trouble, said Harte, who has a "sell" rating on the stock for valuation reasons. "I like the company. I just don't like the stock."

Goldberg of Bear Stearns reiterated his "underperform" rating on Monday. (Bear Stearns fired six people in connection with a mutual fund investigation of its own last week, according to The Wall Street Journal.)

In an e-mail to employees over the weekend, Schwab's chief executive, David Pottruck, gave more details about the investigation.

According to Pottruck, Schwab has identified incidents of market timing with five institutional clients of Excelsior Funds and has terminated two junior employees for deleting e-mails related to the incidents. It also found 18 late trades in its Schwab Mutual Fund Marketplace, which processes 50,000 orders daily, he said.

"Most of these trades were received on time but for one reason or another had an adjustment or substitution after the deadline in a manner that may have been contrary to company policy," Pottruck said. "Our research is still a work in progress," but "99.99%" of those trades that were examined "appear to be fine."

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