Brokerages can prohibit class action lawsuits by their
customers following a landmark decision
last Thursday that left single-claim arbitration as the only
arena for disputes between brokers and investors.
The decision by a Financial Industry Regulatory Authority
(Finra) hearing panel recognised Charles Schwabs ability
to prohibit judicial class actions in agreements with
customers. Furthermore, Finras rules prohibit the hearing
of class actions by its arbitration panels.
Finras bylaws had protected investors rights to
file judicial class actions until the panel interpreted those
rules to be in conflict with the Federal Arbitration Act
clarified by the...