Finra signals end of class actions for brokers

Author: | Published: 26 Feb 2013

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 Schwab’s ability to prohibit judicial class actions in agreements with customers. Furthermore, Finra’s rules prohibit the hearing of class actions by its arbitration panels.

Finra’s 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...