Supreme Court Allows Advisor Firm to Sue Charles Schwab

The United States Supreme Court recently upheld a decision to allow Northstar Financial Advisors Inc. to sue Charles Schwab on behalf of its clients for breach of contract. The 9th U.S. Circuit Court of Appeals claimed that the fund’s fundamental policies were sufficient to form a binding contract. Schwab allegedly deviated from the explicit objectives of a mutual fund sold to its investors. The objective was to track the Lehman Brothers U.S. Aggregate Bond Index and avoid industry bets. Brokers allegedly invested over 25% of assets in mortgage securities and collateralized mortgage obligations. The fund lost 4.8% and the index rose 7.85%.

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