Schwab Must Face Suit Over Short-Sell Trading Glitch
Melissa Angell, 19 March 2021
A California federal judge ruled Friday that Charles Schwab & Co. must face a proposed class action brought by one of its retail customers challenging an alleged bug in its trading system that prevented the customer from exiting his short position.
U.S. Magistrate Judge Laurel Beeler wrote in her 14-page order that Robert Wright adequately stated a breach of contract claim, finding that factual issues about Schwab’s control of the alleged glitch and Wright’s reaction to the incident preclude dismissal.
“Here the plaintiff alleged that he gave Schwab notice of the malfunction,” the order said. “The sufficiency of how he responded to the glitch and notified Schwab is a fact issue that precludes the court’s holding as a matter of law that he failed to notify Schwab adequately.”
Wright sued the financial services company in July, arguing that he attempted to close a short position in Royal Caribbean stock, but instead of closing his position Schwab’s automated system purportedly purchased more shares instead.
