Find Mediators Near You:

FINRA Reverses Hearing Panel in Schwab Enforcement Case: Class Action Waiver Violates FINRA Rules

ADR Prof Blog by Andrea Schneider, Michael Moffitt, Sarah Cole,Art Hinshaw, Jill Gross and Cynthia Alkon.

In a stunning but hoped-for reversal (based on am amicus brief I co-authored in the case), FINRA’s Board of Governors reversed a disciplinary hearing panel decision in the FINRA v Schwab enforcement action. (See some of my previous blog posts on the subject, here, here and here.) That hearing panel had held, among other things, that Schwab’s class action waiver in its standard customer agreement’s pre-dispute arbitration clause violated FINRA rules but those rules could not be enforced under the Federal Arbitration Act.

FINRA reversed that aspect of the hearing panel decision, and held that the Securities Exchange Act constituted a sufficient Congressional command to overcome the FAA’s mandate to courts to enforce arbitration agreements as written. Since the Exchange Act delegated to the SEC, which in turn delegated to FINRA, the authority to regulate broker-dealers’ arbitration agreements for the protection of investors, FINRA’s rules barring class action waivers and mandating that investors be able to bring class claims in court were enforceable.

This is the precise argument I spelled out in my article with Professor Barbara Black, Investor Protection Meets the Federal Arbitration Act, 1 Stan. J. Complex Litig. 1 ­­(2012).

In my view, this is the right result, both under the law and for investors.

                        author

Jill Gross

Professor Jill I. Gross has been a director of the Investor Rights Clinic (formerly the Securities Arbitration Clinic) since 1999. Professor Gross teaches the Investor Rights Clinic and Seminar, Mediation and Arbitration, and Securities Litigation and Enforcement. She has published numerous law review articles in the area of dispute resolution… MORE >

Featured Members

ad
View all

Read these next

Category

Mediate.com Great Reads Book Club: Moshe Cohen on Collywobbles – How to Negotiate When Negotiating Makes You Nervous

Our February 2022 Book Club gathering was with Moshe Cohen about his book "Collywobbles: How to Negotiate When Negotiating Makes You Nervous." Moshe was interviewed by Justin Wright. https://youtu.be/_9dQKz9l-4Y

By Moshe Cohen
Category

Can listening really make the difference when using contracts or agreements in business?

Looking back over mediations from this past year, I realize that listening was the deciding factor in escalation of conflicts.  Or should I really say not listening.  Describing listening and...

By Joanna Wares
Category

Advocacy in Mediation

Advocacy in simple parlance is recommendation or support or projection of a cause. Advocacy presupposes a difference of opinion or a conflict and the need to clarify the ‘knot’, get...

By Uma Ramanathan
×