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.

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