Schwab Settles Suit Over Order-Handling Procedure
Leading discount brokerage Charles Schwab Corp. has settled a long-standing lawsuit over its stock order-handling procedures.
U.S. District Judge Charles Schwartz Jr. in New Orleans on Monday approved a $20-million settlement under which Schwab will educate investors and improve the way it processes buy and sell orders. But the firm won’t pay investors or give them discounts on trades.
The judge said an analysis of trades of the named plaintiffs showed no price disparities that cost them money.
The plaintiffs included investors who were Schwab customers between 1985 and mid-1999. More than 6 million current Schwab customers received notice of the suit this year.
The suit accused Schwab of violating its fiduciary responsibility by sending orders to regional and third markets, which paid the company for the orders. The arrangement set up a potential conflict of interest and didn’t ensure customers got the best price, the suit contended.
The accusations go to the heart of the Securities and Exchange Commission’s proposal Tuesday to shed more light on brokerage order-execution procedures.
Schwab admitted no wrongdoing but said it agreed to changes that go beyond regulatory requirements to end the litigation.
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