Can Schwab Prohibit Clients From Pursuing Class-Action Suits?

In challenging Charles Schwab & Company’s attempts to require clients waive their right to participate in class-action suits against the firm, regulators are drawing attention to the controversial investor arbitration process. In the 1980s brokerage firms won the right to force customers to agree to arbitration – a legal recourse that overwhelmingly favors large firms over individual investors – except in the case of broad class-action lawsuits. When Charles Schwab recently added a clause to client agreements prohibiting involvement even in class-action suits, the Financial Industry Regulatory Authority filed a disciplinary action. The issue will go before Finra’s adjudicatory panel this week.