Schwab said it's the subject of a Securities and Exchange Commission examination and that its U.S. Trust Corp. unit has received subpoenas from New York Attorney General Eliot Spitzer, according to a regulatory filing.

``Among other things, the company is investigating circumstances in which a small number of parties were permitted to engage in short-term trading of U.S. Trusts's Excelsior Funds,'' it said, ``and a limited number of instances at Schwab in which fund orders may have been entered or processed'' after the 4:00 Eastern closing time.

``We think it's serious,'' said Michael Baum, an analyst at Friedman Billings Ramsey, which rates the discount broker ``market perform.''

Shares of Schwab fell 27 cents, or 2 percent, to $13.05 at 9:37 a.m. in composite trading on the New York Stock Exchange.

Separately, Schwab said its 7.7 million customers made an average of 156,000 commission-generating trades a day last month, down from 159,900 in September and up 22 percent from one year- earlier. It took in net new assets of $3.1 billion last month.

Schwab also said its sale of hundreds of mutual funds through its OneSource fund marketplace could be hurt by new rules being considered by securities regulators concerning mutual fund distribution and servicing.

`Key Gauge'

Chief Financial Officer Christpher Dodds last month said September would be a ``key month in gauging the sustainability'' of investor confidence in a rising stock market. The Standard & Poor's 500 Index has gained 20 percent this year and the Nasdaq Composite Index 47 percent.

At Ameritrade Holding Corp., the biggest discount broker by number of trades, customers averaged 170,000 trades a day in October, the company said last week and added a net total of 20,000 new accounts.

Schwab held customer assets of $913 billion at the end of October, up 4 percent from $877 billion one month earlier and well above Ameritrade's $61.1 billion.

Individual investors have returned to buying stocks as market averages have risen. In October, the Dow Jones Industrial Average, S&P 500 Index and Nasdaq Composite Index rose by 5.7 percent, 5.5 percent and 8.1 percent, respectively, from September 2003 levels.