January 9, 2012
FINRA Proposes to Preclude Collective Action Claims from Arbitration
FINRA recently filed with the SEC a rule change that would amend Rule 13204 of the Industry Arbitration Code to preclude collective action claims from being arbitrated under the Industry Code. (Download SR-FINRA-2011-75) The amendment is a consequence of a federal district court opinion that held, contrary to the view of FINRA Dispute Resolution, that collective action claims under the Fair Labor Standards Act were not "class actions" for the purpose of Rule 13204 and thus compelled arbitration of the claims before FINRA. (Apparently the federal district court thinks it can interpret FINRA rules better than the organization itself.) The amendment explicitly provides that collective action claims under the Fair Labor Standards Act, the Age Discrimination in Employment Act or the Equal Pay Act of 1963 may not be arbitrated under the Code.
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