State securities regulators are throwing their support behind FINRA in its battle to overturn a decision by the self-regulator’s hearing panel that allowed Charles Schwab & Company to prevent its customers from participating in class-action lawsuits.
The North American Securities Administrators Association (NASAA) on Wednesday filed an amicus brief with FINRA’s National Adjudicatory Council (NAC), the national committee that reviews initial decisions rendered in FINRA disciplinary and membership proceedings, supporting FINRA’s efforts.
“Charles Schwab’s attempt to unilaterally alter its account agreements to include the class-action waiver is an obvious attempt by the firm to insulate itself from liability to its own clients,” said Heath Abshure (right), NASAA president and Arkansas securities commissioner, in a statement. “This ruling would essentially allow broker-dealers to prohibit participation in class actions against them by their customers. That’s wrong on the merits and bad public policy.”
The Public Investors Arbitration Bar Association (PIABA), AARP, the National Consumer Law Center and Public Justice also filed similar amicus briefs the same day supporting FINRA’s efforts to overturn the hearing panel’s decision.
NASAA argued that the FINRA hearing panel erred by refusing to enforce FINRA rules prohibiting the use of class-action waivers in customer agreements. “In doing so, the hearing panel ignored FINRA’s statutorily duty to enforce the organization’s rules, relied on an erroneous application of the Federal Arbitration Act, and placed investors in imminent harm by precluding their ability to seek redress for small dollar claims,” NASAA’s brief said.