The Charles Schwab Corporation today announced it has reached a
settlement with the U.S. Securities and Exchange Commission to
resolve an investigation into historical disclosures related to the
Schwab Intelligent Portfolios (SIP) advisory solution. The company
issued the following statement:
“Schwab has resolved a matter with the SEC regarding certain
historic disclosures and advertising related to Schwab Intelligent
Portfolios between 2015-2018, and we are pleased to put this behind
us. The SEC Order acknowledges that Schwab addressed these matters
years ago.
“In entering the settlement, Schwab neither admits nor denies
the allegations in the SEC’s Order. We believe resolving the matter
in this way is in the best interests of our clients, company, and
stockholders as it allows us to remain focused on helping our
clients invest for the future. As always, we are committed to
earning our clients’ trust every day and work diligently to
maintain the highest standards for professional conduct throughout
our organization.
“SIP is a key component of our advisory lineup and an important
way to help clients invest for the future in a diversified way. SIP
was designed to provide clients competitive returns across
different market environments, and the ability to help weather
volatility or challenging market conditions over time. The
service recommends a diversified portfolio based on a client’s
goals, time horizon and risk profile, and keeps the allocation
consistent through automated rebalancing as markets fluctuate to
help a client stay focused on their longer-term financial goals. We
are proud to have built a product that allows investors to elect
not to pay an advisory fee in return for allowing us to hold a
portion of the proceeds in cash, and we do not hide the fact that
our firm generates revenue for the services we provide. We believe
that cash is a key component of any sound investment strategy
through different market cycles.
“Schwab has been democratizing investing for almost half a
century, and SIP is a direct reflection of this focus. With its
innovative approach and focus on clients’ individual needs, SIP has
transformed the investment advisory space, making it possible for
more investors to access the benefits of professional money
management in a simpler manner. Since the debut of SIP in 2015, it
has delivered strong performance aligned with each portfolio’s risk
profile and asset allocation. Hundreds of thousands of Americans
have benefited from SIP’s automated, diversified portfolios, which
deliver value, sophistication, tailored solutions and 24/7
support.”
The settlement with the SEC involves Schwab Wealth Investment
Advisory, Inc., Charles Schwab Investment Advisory, Inc. and
Charles Schwab & Co., Inc. Under the terms of the settlement,
Schwab will pay $186.5 million to resolve the matter, which will be
deposited into a Fair Fund account for distribution to affected
investors. Schwab will also retain an Independent Compliance
Consultant to review CS&Co.’s and CSIA’s current supervisory,
compliance, and other policies and procedures concerning
CS&Co.’s and CSIA’s SIP-related disclosures, advertising, and
marketing communications with clients or potential clients.
As previously disclosed in a Form 8-K filing dated July 1, 2021,
Schwab’s second quarter 2021 financial results included a liability
and related non-deductible charge of $200 million in connection
with the settlement.
About Charles Schwab
The Charles Schwab Corporation (NYSE: SCHW) is a leading
provider of financial services, with 33.8 million active brokerage
accounts, 2.3 million corporate retirement plan participants, 1.7
million banking accounts, and approximately $7.28 trillion in
client assets. Through its operating subsidiaries, the company
provides a full range of wealth management, securities brokerage,
banking, asset management, custody, and financial advisory services
to individual investors and independent investment advisors. Its
broker-dealer subsidiaries, Charles Schwab & Co., Inc., TD
Ameritrade, Inc., and TD Ameritrade Clearing, Inc., (members SIPC,
www.sipc.org), and their affiliates offer a complete range of
investment services and products including an extensive selection
of mutual funds; financial planning and investment advice;
retirement plan and equity compensation plan services; referrals to
independent, fee-based investment advisors; and custodial,
operational and trading support for independent, fee-based
investment advisors through Schwab Advisor Services. Its primary
banking subsidiary, Charles Schwab Bank, SSB (member FDIC and an
Equal Housing Lender), provides banking and lending services and
products.
TD Ameritrade, Inc. and TD Ameritrade Clearing, Inc. are
separate but affiliated companies and subsidiaries of TD Ameritrade
Holding Corporation. TD Ameritrade Holding Corporation is a wholly
owned subsidiary of The Charles Schwab Corporation. TD Ameritrade
is a trademark jointly owned by TD Ameritrade IP Company, Inc. and
The Toronto-Dominion Bank.
More information is available at www.aboutschwab.com.
Disclosures:
We encourage you to read the Schwab Intelligent Portfolios
Solutions™ disclosure brochures for important information, pricing,
and disclosures. Before you enroll, it's important you understand
any and all costs, including the role of cash and the way Schwab
earns income from the cash allocation in your portfolio, which
results in lower overall portfolio performance under certain market
conditions, for example when other riskier assets outperform cash,
and how Schwab and its affiliates work together.
Schwab Intelligent Portfolios® and Schwab Intelligent Portfolios
Premium™ are made available through Charles Schwab & Co. Inc.
("Schwab"), a dually registered investment advisor and broker
dealer. Portfolio management services are provided by Charles
Schwab Investment Advisory, Inc. ("CSIA"). Schwab and CSIA are
subsidiaries of The Charles Schwab Corporation.
The cash allocation in Schwab Intelligent Portfolios Solutions™
will be accomplished through enrollment in the Schwab Intelligent
Portfolios Sweep Program (Sweep Program), a program sponsored by
Charles Schwab & Co, Inc. By enrolling in Schwab Intelligent
Portfolios Solutions, clients consent to having the free credit
balances in their Schwab Intelligent Portfolios Solutions brokerage
accounts swept to FDIC-insured Deposit Accounts at Charles Schwab
Bank through the Sweep Program. Funds deposited at Charles Schwab
Bank are insured, in aggregate, up to $250,000 per depositor, for
each account ownership category, by the Federal Deposit Insurance
Corporation (FDIC). Charles Schwab Bank is affiliated with Charles
Schwab & Co., Inc. and Charles Schwab Investment Advisory, Inc.
Diversification does not ensure a profit and does not protect
against losses in a declining market.
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version on businesswire.com: https://www.businesswire.com/news/home/20220610005609/en/
MEDIA: Alison Wertheim Charles Schwab
alison.wertheim@schwab.com
INVESTORS/ANALYSTS: Jeff Edwards Charles Schwab
jeff.edwards@schwab.com
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