NEW YORK, Nov 24 (Reuters Legal) - A federal judge edged closer to approving Charles Schwab Corp's revised $235 million agreement to resolve a lawsuit by investors who said they lost money when a bond mutual fund marketed as safe sank in value.
U.S. District Judge William Alsup in San Francisco directed both sides by Nov 29 to submit revised notices to be sent to investors in the Schwab YieldPlus fund that advise them of their rights, including if they opt out of a settlement.
In his order on Tuesday, the judge said the changes are needed "prior to approval." He also set a final hearing on the fairness of the settlement for Feb. 11, 2011.
An accord would resolve claims by about 250,000 YieldPlus investors who sued Schwab, the San Francisco-based discount brokerage, alleging they lost $970 million because of the fund's exposure to risky mortgage-related securities.
The investors contended that Schwab invested nearly half the assets of YieldPlus in uninsured mortgage securities, while marketing the "ultra-short" bond fund as a secure alternative to cash or money market funds.
YieldPlus lost more than 42 percent of its value in 2008 and 2009, data from Morningstar Inc shows.
The revised agreement was designed to eliminate the chance that investors who live outside California could recover twice on their claims.
Schwab had withdrawn on Nov. 8 from an earlier version of the accord that it said left this possibility open.
The case is In re: Charles Schwab Corp Securities Litigation, U.S. District Court, Northern District of California, No. 08-01510. The majority of plaintiffs in the suit are represented by the San Francisco office of Hagens Berman Sobol Shapiro. Charles Schwab is represented by the San Francisco and Palo Alto offices of Morrison & Foerster, and by the San Francisco offices of Quinn Emanuel Urquhart & Sullivan and Taylor & Company Law Offices. (Reporting by Jonathan Stempel of Reuters; Additional reporting by Jeff Roberts of Reuters Legal)
Schwab pulls out of $235 million YieldPlus settlement