Financial Advisor Magazine reported that Charles Schwab Investment Advisory is facing a class action lawsuit filed by investors alleging that the company breached its fiduciary duty with its robo-adviser’s cash sweeps. The publication turned to SEC and regulatory enforcement defense partner Jim Lundy for insight on the company’s position.
Lundy, a former Securities and Exchange Commission (SEC) attorney who worked with the Division of Enforcement, said, “I’m sure that Schwab will vigorously defend against the claims.” He now works with investment management firms and other clients across the country in defending enforcement investigations but is not involved in the suit.
The case was triggered by Schwab’s disclosure in July that it had set aside $200 million to cover an SEC investigation, Lundy explained. “It’s very clear in the class action complaint that they cite the disclosure” as the genesis of the lawsuit, he added.
“The SEC has not brought an action against Schwab, nor has there been a settlement yet. Whether or not that happens remains to be seen,” Lundy noted.