The margin interest being charged actually appears reasonable. The question becomes is whether your family member was suitable for margin in the first place. Someone needs to sign a margin agreement to have a margin account. This in most cases requires attestations about one's investment objectives and financial situation. Someone approved the margin agreement and you should try to find out why.
Whether there is a fiduciary duty here is questionable in my view. It's sort of a dram shop kind of thing. But again, I think the clue to what's going on resides in the margin agreement. At the very least, take a look at it.
The foregoing is not legal advice nor is it in any manner whatsoever meant to create or impute an attorney/client relationship.
You family member may have a claim agaisnt Schwab. If they gave him incorrect information about reducing his margin account they are liable for damages, and of course, why would they do that? Margin agreements are very profitable for brokerages.
Margin agreements usually have attorney fee clauses in them, so if your family member has a claim and wins, he has a good chance of recovering his attorney fees as well.
The precise facts are very important here, including dates, as Schwab will want to argue time limitations on some of this. Also, what State you are in plays a part.
If your family member wishes to discuss this claim in more detail, I am happy to give a phone consultation. Feel free to contact me.
Legal Disclaimer: Mr. Carlson is licensed to practice law in California. The response herein is not legal advice and does not create an attorney/client relationship. The response is intended as legal education and to provide general information about the matter within the question.
Mr. Carlson's and mr. Cornish's answers were very good. See them for helP.
Any comments offered are not intended as legal advice. This attorney does not know the specifics of the particular case sufficiently to offer legal advice. You should hire a lawyer who can evaluate the details of your specific situation before offering advice.