The matter was a civil SEC Enforcement Action arising from the Schwab YieldPlus Fund (“YieldPlus”), an ultrashort-term bond fund that suffered large losses and redemptions during the 2007–2008 credit crisis. The Securities and Exchange Commission alleged that the fund's portfolio manager engaged in fraudulent and deceptive conduct in connection with YieldPlus, including misrepresentations about the fund's diversification, liquidity, maturities, stability, and risk and—of particular relevance—false statements about the fund's level of redemptions made on two August 2007 conference calls with registered representatives and independent investment advisers. The Commission further alleged that the misconduct resulted in the portfolio manager receiving higher compensation.
On behalf of the Securities and Exchange Commission, Mark E. Zmijewski—Professor Emeritus at The University of Chicago Booth School of Business—was retained to analyze two issues: whether the fund's redemption levels around the August 2007 conference calls were materially different from the defendant's characterization of them, and how YieldPlus's performance affected the defendant's compensation.
On the first, Professor Zmijewski analyzed YieldPlus's weekly net investment flows—dollars invested less dollars redeemed—over an extended period. On the second, Professor Zmijewski analyzed the role of incentive compensation in the defendant's total compensation and isolated the portion of that compensation attributable to YieldPlus.