Charles Schwab reaches deal to settle 2008 suit over bond fund drained by mortgage meltdown

Schwab settles mortgage-backed securities suit

SAN FRANCISCO — Charles Schwab will pay $200 million to resolve a federal class action lawsuit filed by investors who say the financial holding company misled them over the safety of mortgage-backed securities.

The fund that angered investors shriveled from nearly $14 billion in 2007 to less than $1 billion in early 2008 as investors bailed out and managers were forced to dump their holdings cheaply.

The discount broker would avoid a trial with the settlement, but it must still be approved by the court.

Shares of Charles Schwab Corp. added 14 cents in premarket trading to $19.20.