The Securities and Exchange Commission said Schwab’s robo-adviser portfolios kept between 6% and 29.4% of assets in cash, instead of investing the money in stocks or other securities. The practice made money for Schwab’s affiliated bank, which lent out the cash, and the investment adviser made “false and misleading statements” in regulatory brochures about the conflict of interest, the SEC said in a settlement order.
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Charles Schwab paying more than $186m in settlement over robo-adviser business
“Schwab claimed that the amount of cash in its robo-adviser portfolios was decided by sophisticated economic algorithms meant to optimize its clients’ returns when in reality it was decided by how much money the company wanted to make,” said SEC enforcement director Gurbir S. Grewal.
