FINRA Board Finds Charles Schwab & Co. Violated Rules by Adding Waiver Provisions in Customer Agreements

The Board of Governors of FINRA issued a decision finding that Charles Schwab & Co., Inc. ("Schwab") violated FINRA rules by adding waiver language to customer account agreements prohibiting customers from participating in class actions. Specifically, the waiver provisions required customers to agree that any claims against Schwab be arbitrated solely on an individual basis, and that arbitrators had no authority to consolidate more than one party's claims. This decision reverses, in relevant part, a prior decision in favor of Schwab that would have allowed Schwab to enforce a contractual provision preventing investors from participating in class actions.

See: FINRA Press Release.
See also:FINRA Hearing Panel with Regard to Arbitration Provisions in Broker-Dealer Customer Agreements (with Lofchie Comment)