Charles Schwab Faces SEC Probe for Robo Advisory Reporting

Charles Schwab Corp is facing an investigation by the US Securities and Exchange Exchange An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv Read this Term Commission (SEC) over concerts of history disclosures of its robo advisory solutions, the American brokerage revealed on Friday.

In a Form 8-K filing with the securities market regulator, the broker said that it is responding to an investigation arising from a compliance examination. “The investigation largely concerns historic disclosures related to the Schwab Intelligent Portfolios® (SIP) digital advisory solution,” it added.

The broker further elaborated that it is now cooperating with the SEC in the investigation and ‘is evaluating its options’.

Charles Schwab is one of the largest brokerages operating in the United States and is known for its operations as a discount broker. Its robo adviser services automatically allocate customer funds to the exchange-traded funds (ETFs) based on client questionnaires.

The automated service received almost $64 billion in client assets as of March 31, 2021, which is 51 percent up on a year-over-year basis.

Impact on Financials

The broker is now expecting the impact of the investigation on its second-quarter financials.

“Given the investigation’s status, Schwab’s second quarter 2021 financial results will include a liability and related non-deductible charge of $200 million. The company’s ultimate liability may differ, depending on the outcome of the matter,” the filing added.

Further, Schwab’s United Kingdom subsidiary faced an £8.96 million fine late last year for failure to protect client assets.

Meanwhile, the brokerage bought local competitor TD Ameritrade last year and is now integrating that subsidiary platform into its existing offering. The integration process is anticipated to be costing the company around $1.6 billion. Schwab also closed several other acquisition deals last year.