This is an update to our February 21, 2013, blog post: Charles Schwab Allowed to Prevent Customer Class Action Lawsuits.
Yesterday, a spokesperson for the Financial Industry Regulatory Authority (FINRA) announced that an appeal had been filed with the National Adjudicatory Council (NAC)–an internal appeal board that reviews initial decisions rendered in FINRA enforcement actions. However, an NAC decision may not put an end to this important issue because NAC decisions can be appealed to the Securities Exchange Commission (SEC).
If the FINRA ruling is ultimately upheld, brokerage firms will be able to prevent customer class action lawsuits and require all customers to pursue individual claims through FINRA’s securities arbitration program. A bar on class actions would have the greatest impact on investors with claims that are too small to pursue individually and also the legions of investors who are unaware that any wrongs have been committed until they receive notice that a class action lawsuit was filed on behalf of all affected investors.
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