Suit claims Schwab misled investors
New York Atty. General Andrew Cuomo, left, and Charles Schwab.
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Tess Vigeland: New York Attorney General Andrew Cuomo sued brokerage giant Charles Schwab today. He's accusing Schwab of fraud and of misleading investors when it sold them complicated securities that imploded at the beginning of the financial crisis. They're called auction-rate securities. And Cuomo already went after big Wall Street banks that dreamed them up. Jill Barshay has the latest from the desk of don't-ever-buy-what-you-don't-understand.
JILL BARSHAY: Charles Schwab says it didn't create these auction rate securities, and it shouldn't take the blame for the damage they've done.
But securities lawyer Jacob Zamansky says Schwab's executives knew there were problems with these products. And yet they continued selling them to customers.
JACOB Zamansky: Schwab brokers were pitching the auction rate securities as cash equivalents. They didn't disclose to investors that the auctions were failing, and that their money could be frozen for years.
Schwab says it was as duped by the Wall Street banks as its customers were, but that's hardly reassuring to the public.
Mark Johannessen is the chair of the Financial Planners Association. He says this and other scandals are making it hard for consumers to know who they can trust with their money.
MARK Johannessen: There's no doubt that our profession has been tarnished as well. As a financial planner and investment adviser, we now get questions from clients in ways that we never did before.
Johannessen says he's working on a new industry standard to safeguard consumers.
But securities lawyer Zamansky says individual investors need to do a better job of looking out for themselves. He says banks and brokerages still aren't telling the whole truth about many of the financial products they sell.
Zamansky: Investors really need to do their own homework cause there have been so many problems on Wall street.
Zamansky doesn't expect Cuomo stop with Schwab. There are plenty of other big brokers in the attorney general's sites.
In New York, I'm Jill Barshay for Marketplace.