FINRA Hearing Panel Updates on Complaint Against Charles Schwab & Company

Feb 27, 2013 (Close-Up Media via COMTEX) -- The Financial Industry Regulatory Authority (FINRA) announced that a FINRA hearing panel has dismissed two of three causes in a February 2012 complaint against Charles Schwab & Company.

According to a release, the panel concluded that the amended language used in Schwab's customer agreements to prohibit participation in judicial class actions does violate FINRA rules, but that FINRA may not enforce those rules because they are in conflict with the Federal Arbitration Act (FAA).

In the third cause of action, the panel found that Schwab violated FINRA rules by attempting to limit the powers of FINRA arbitrators to consolidate individual claims in arbitration. The panel further concluded that the FAA does not bar enforcement of FINRA's rules regarding the powers of arbitrators, because the FAA does not dictate how an arbitration forum should be governed and operated, or prohibit the consolidation of individual claims. The panel ordered Schwab to take corrective action, including removing violative language, and imposed a fine of $500,000.

In its complaint, FINRA's Enforcement Department had charged Schwab with violating FINRA rules concerning language or conditions that firms may place in customer agreements when Schwab amended its customer account agreement to include a provision requiring customers to waive their rights to bring or participate in class actions against the firm. The agreement also included a provision requiring customers to agree that arbitrators in arbitration proceedings would not have the authority to consolidate more than one party's claims.

Unless the hearing panel's decision is appealed to FINRA's National Adjudicatory Council (NAC) or is called for review by the NAC, the hearing panel's decision becomes final after 45 days.

FINRA, the Financial Industry Regulatory Authority, is an independent regulator for all securities firms doing business in the United States.

More information: finra.org ((Comments on this story may be sent to newsdesk@closeupmedia.com))

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