The law firm Schriffrin & Barroway of Bala Cnwyd, Pa., filed an administrative complaint Friday against Charles Schwab for allowing preferred customers to engage in illegal and improper trading practices.
The complaint alleges that Schwab allowed a number of its institutional clients to rapidly trade in and out of its Excelsior family of funds to the detriment of individual shareholders, thereby breaking its fiduciary duty.
The class action suit was filed in a California district court on behalf of all individuals who purchased, redeemed or held shares of any of the 31 Excelsior funds named in the complaint, between Nov. 23, 1998 through Nov. 14, 2003. A lead plaintiff for the case against Schwab will be determined by January 20, 2004.
Separately, New York Attorney General Eliot Spitzer said that the settlements against some firms would cause them to "disappear." He reiterated that, unlike the SEC, he would not back down on his settlements, that they will be "painful" and that a number of "individuals will face criminal charges."
Spitzer also tipped his hand that he will also be concentrating on mutual funds fee structures, as they have "vastly greater impact" on individuals than market timing or late trading.