Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Monday, May 6, 2013

NASAA Writes SEC About Class Action Waivers

The North American Securities Administrators Association (NASAA) has addressed a letter to SEC Chair White to comment on Charles Schwab's class action waiver that it now includes in its brokerage agreements.  Although the class action waiver violates FINRA Rules, a FINRA hearing panel recently concluded that FINRA could not enforce its rules against Schwab because they were "anti-arbitration" in violation of the Federal Arbitration Act.  The Hearing Panel's decision is currently on appeal before FINRA's internal appellate body.  NASAA reiterates its long standing opposition to mandatory arbitration of customers' disputes and reminds the SEC that "Section 921 [of Dodd-Frank] provides the SEC the authority, by rule, to prohibit or impose limitations on the use of mandatory arbitration clauses in broker-dealer and investment adviser customer contracts."

NASAA concludes by "commend[ing] the SEC for taking several steps over the years to improve the arbitration forum and process, and encourage[ing] the SEC to take further action to ensure that investors who are forced into arbitration receive the fairest forum possible."

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