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Schwab Sued by Employees Over Plan Self-Dealing

February 24, 2017



A class action ERISA lawsuit has been filed against Charles Schwab and its retirement plan fiduciaries alleging fiduciary breaches and prohibited transactions.


The lawsuit claims plan fiduciaries engaged in the imprudent and disloyal exercise of their discretionary fiduciary authority over the plan to include Schwab’s own affiliated investment products as investment options within the plan and sale of their own services to the plan. In doing so, the defendants “reaped significant fees and profits at the expense of the plan and its participants.”


At issue in the case are several types of Schwab Affiliated Products and Services, categorized as:

  • the “Affiliated Funds”
  • the “Schwab Savings Account”
  • the “Self-Directed Brokerage”
  • the "Interest Free Loan from Unallocated Plan Cash”


The lawsuit accuses plan fiduciaries of making no meaningful investigation into whether these Schwab Affiliated Products and Services were prudent for the plan, or whether alternative funds offered by other providers would be more appropriate, cost effective or better performing. Instead, the complaint says they “imprudently and disloyally elected to provide the Schwab Affiliated Products and Services to the Plan in an effort to generate fees for the Schwab Entity Defendants at the expense of the Plan and its participants.” The lawsuit says the fees were excessive, unreasonable and far exceeded the real costs associated with administering the plan.


Charles Schwab intends to vigorously defend against this case, and believe it is totally without merit.