Posts Tagged ‘FINRA’
The Consumer Corner - Thursday, May 2, 2013 15:22 - 0 Comments
Charles Schwab & Co., Inc. – the well-known investment advisor holding more than $2 trillion in assets for millions of investors – is trying in a “sneaky manner” to eviscerate its customers’ rights. In the fine print of Schwab’s terms of service, there is a forced arbitration clause and a ban on consumers joining together in class actions – a serious blow for small investors. Corporations are increasingly using these terms to deny consumers their constitutional rights. The forced arbitration clause means that if you ever have a dispute with the company, you can’t take your dispute to a public court. Instead, you have to go to a private, secretive tribunal chosen by Charles Schwab.
As we have reported in previous issues, class-action bans prevent you from banding together with other customers to hold firms accountable for deceptive, fraudulent and illegal practices. In the event Schwab misled investors and caused them to lose their hard-earned savings, only those with the time and resources to seek justice individually – in costly and secret arbitration that is stacked against them – stand a chance to recover their losses. Meanwhile, Schwab can escape real accountability for its wrongdoing, if that happened to be the case. Schwab’s decision to include arbitration is particularly egregious because it is the first of the brokerage firms to prohibit investors from participating in class actions. Now that Schwab has done it, others will likely follow.
The Financial Industry Regulatory Authority (FINRA), the banking industry self-regulatory body, already has rules to prevent brokerage firms like Schwab from banning class actions. By inserting a class-action ban into its terms, Schwab violated those rules. FINRA filed a complaint against Schwab to order it to remove the class-action ban. That’s very significant. Even a corporate self-regulatory body that’s packed with bankers appears to recognize that it’s wrong to deny an individual’s constitutional rights.
Unfortunately, FINRA lost the dispute against Schwab, but the fight is far from over. An appeal is pending on the case. But, the Securities and Exchange Commission (SEC) could step in and require Schwab and other brokerage firms to drop the predatory language from their terms. In the meantime, Public Citizen continues its work for U.S. consumers. They should be commended for leading this fight against Schwab in the effort to restore its customers’ rights.
Source: Public Citizen
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