Charles Schwab is preparing to shell out millions in the YieldPlus Fund lawsuit even as the case readies for trial. The discount brokerage revealed today in its first quarter earnings release that it has reserved $11 million to handle possible damages on the California state law claims (damages have not yet been determined by the court), in advance of a May 10 trial date for the federal claims.

"The amount reserved reflects an estimate of the company's liability under a damages framework proposed by the court," Schwab reports. "Actual liability for plaintiffs' California state law claim will be determined in a subsequent proceeding and could be higher or lower than the amount reserved."

That $11 million for the state claims, however, is peanuts compared to what could happen on the federal side. Schwab confided that, in federal court, "an adverse judgement could result in material liability to the company of as much as $890 million, the amount of damages plaintiffs have asserted relating to their federal securities law claims."

Meanwhile, the SEC's investigation, and 194 related individual arbitration claims seeking another $34 million, are still pending.

In the same earnings report, Schwab revealed that its proprietary fund assets fell two percent, from $212.8 billion on December 31, 2008 to $207.6 billion on March 31, 2010. The pain stemmed from Schwab's money market assets, which fell four percent to $164.1 billion, even as Schwab's money fund fee waivers rose 14 percent to $125 million (against $545 million in asset management and administration fees).

On the mutual fund supermarket side, the total assets in Schwab's mutual fund marketplace (excluding Schwab's own funds, and including OneSource) rose six percent in the first quarter to $532.1 billion. And Schwab's own new exchange-traded funds (ETFs) saw assets rise to $954 million at the end of March. 

Stay ahead of the news ... Sign up for our email alerts now
CLICK HERE