Opening the Floodgates of Small Customer Claims in FINRA Arbitration: FINRA v. Charles Schwab & Co., Inc.

42 Pages Posted: 8 Feb 2015

Date Written: 2014

Abstract

This article explores the implications and looming conflict between recent Supreme Court jurisprudence upholding the supremacy of the Federal Arbitration Act and the Financial Industry Regulatory Authority’s (“FINRA”) prohibition of any provisions in pre-dispute arbitration agreements that would limit or abrogate any of the procedural and substantive remedies available to customers. The article explores this conflict through the lens of a FINRA enforcement action against Charles Schwab & Co., Inc., which inserted a class action waiver provision in its customer agreement on the heels of the Supreme Court’s decision in AT&T Mobility v. Concepcion, 131 S. Ct. 1740 (2011). The article also provides a brief background of the regulatory framework governing the brokerage industry and its use of PDAAs in agreements with customers, and FINRA’s limitations on judicial class action waivers. Finally the article sets forth arguments explaining why FINRA’s prohibition against class action waivers do not violate the Federal Arbitration Act.

Keywords: Federal Arbitration Act, securities arbitration, predispute arbitration agreement, securities regulation, Financial Industry Regulatory Authority

Suggested Citation

Verges, Teresa Jacqueline, Opening the Floodgates of Small Customer Claims in FINRA Arbitration: FINRA v. Charles Schwab & Co., Inc. (2014). 15 Cardozo J.Conflict Resol. 623, 2014; University of Miami Legal Studies Research Paper No. 2015-10. Available at SSRN: https://ssrn.com/abstract=2549880

Teresa Jacqueline Verges (Contact Author)

University of Miami - School of Law ( email )

P.O. Box 248087
Coral Gables, FL 33146
United States

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