A San Francisco federal judge on Tuesday narrowed the U.S. Securities and Exchange Commission’s case against a former Charles Schwab Corp. executive related to the marketing of the ill-fated YieldPlus short bond fund. But the ruling by U.S. District Judge William Alsup clears the way for a big chunk of the SEC’s case against Kimon Daifotis, the former chief investment officer for fixed income at Schwab’s investment management unit, to proceed to trial next month.
Alsup, citing the U.S. Supreme Court’s Janus v. First Derivative Traders decision, ruled that the SEC hadn’t shown that Daifotis “made” some of the alleged misleading statements for the purposes of federal securities laws, because the statements weren’t made to the investing public. Alsup ruled in favor of Daifotis on three of the four causes of action in play at summary judgment, according to David Bayless, defense counsel at Covington & Burling. Still, Daifotis had not asked for summary judgment on all of the SEC’s charges, and in his 24-page order Alsup found that there were still issues of fact that should go before a jury.
