Charles Schwab filed arguments in federal court in San Francisco on March 19 to try to preclude the Securities and Exchange Commission (SEC) from suing it over its YieldPlus fund, which had nearly 50% of its assets in mortgage-backed securities. Once one of the biggest short-term bond funds in the world, with $13.5bn at its peak in 2007, YieldPlus lost 35%, before dividends, in 2008. Today, a mere shell of its former self, it stands at a mere $184m. In a Wells notice, the SEC accused of Schwab of marketing the fund as being as safe as a money market fund and of withholding information about the fund’s risk from retail investors ahead of a rush of redemptions by Schwab proprietary mutual funds. The two sides are now essentially arguing over the meaning of the word “industry,” under Section 13(a) of the ’40 Act, in determining the fund’s investment mandate and whether the SEC will proceed with a suit. Schwab argues that the SEC’s semantics over adhering to a cap of 25% on “industry” investments refers to industry, as in manufacturing, automobiles or steel, not the mortgage-backed securities industry. SEC rules preclude a fund from investing more than 25% in any one industry without a shareholder vote.