NASAA Statement Regarding FINRA Decision on Schwab Effort to Curb Investor Rights in Class Actions

WASHINGTON (April 24, 2014) – The following is a statement from Russ Iuculano, executive director of the North American Securities Administrators Association (NASAA), regarding FINRA’s Board of Governors decision today finding Charles Schwab & Co., Inc. violated FINRA rules when the firm attempted to prevent its customers from participating in class-action lawsuits. In an amicus brief filed last year with FINRA’s National Adjudicatory Council, NASAA argued that the hearing panel erred by refusing to enforce FINRA rules prohibiting the use of class action waivers in customer agreements. In doing so, NASAA argued, the hearing panel placed investors in imminent harm by precluding their ability to seek redress for small dollar claims.

“State securities regulators are pleased that today’s decision by FINRA’s Board of Governors recognizes the danger in Charles Schwab’s attempt to unilaterally change its customer account agreements to force its clients to waive their rights to participate in class-action lawsuits. Investors should be free to join with other investors through the representative class action process to resolve claims that are too costly to bring independently.

“Schwab’s decision to include class action waivers in the arbitration provisions of its customer contracts is yet another example of the harmful effects of mandatory arbitration clauses and heightens the need to pass the Investor Choice Act (H.R. 2998) introduced by Rep. Keith Ellison (D-MN). This important investor protection legislation, which now has 29 cosponsors, would end the use of mandatory pre-dispute agreements by broker-dealers and investment advisers, and would guarantee class action participation. These agreements, especially when coupled with class action waivers, effectively eliminate any reasonable chance for retail investors with small-dollar claims to have their claims heard in an unbiased and fair forum.”

—NASAA—

For More Information:
Bob Webster | Director of Communications
202-737-0900

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