The Securities and Exchange Commission charged Charles Schwab with making misleading statements about its Schwab YieldPlus Fund. Schwab agreed to pay $118 million to settle the charges.

The SEC also charged former CIO for Fixed Income Kimon Daifotis and EVP Randall Merk, previously president of Charles Schwab Investment Management with fraud and other securities law violations.

The SEC said that rather than adhere to its stated policy of offering only slightly higher risk than a money market fund, YieldPlus invested more than 25% of its assets in private-issuer mortgage-backed securities.

As a result, the YieldPlus’ assets fell from a peak of $13.5 billion in 2007 to $1.8 billion.

“All financial firms and professionals—including large mutual fund providers—must be vigilant in accurately describing the risks of the products they sell to the public, especially the widely held mutual funds that are bread-and-butter investments of retail investors,” said Robert Khuzami, director of the SEC’s division of enforcement.