Sec. Galvin Says Chuck is ‘Disingenuous’

William Galvin, Secretary of the Commonwealth of Massachusetts, today called out Charles Schwab & Co. for recently changing up its customer arbitration agreements by striking its investors’ ability to join class action lawsuits.

In a letter to the San Francisco-based firm, Sec. Galvin said that the firm violated FINRA’s rules prohibiting its members from preventing their own customers from joining civil class actions. For its part, FINRA recently concluded that the amended language used in Schwab's customer agreements to prohibit participation in class actions does violate its rules, but that it was powerless to enforce those rules because they are in conflict with the Federal Arbitration Act, which stipulates that parties give up the right to an appeal on substantive grounds to a court.

“Your firm’s recent comments praising the decision and claiming that customers are better served through FINRA arbitration are disingenuous,” wrote Sec. Galvin.

“It ignores the fact that by placing this arbitration clause in every brokerage account agreement as a matter of course, it denies an investor the basic opportunity to decide for him or herself what forum is in his or her best interest. The ruling is akin to giving every rogue broker-dealer the green light to steal from their customers in small dollar amounts.”

 

 

 

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Mutual funds Compliance Money Management Executive
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