FINRA Goes Head-to-Head With Schwab Over Client Agreements

The Financial Industry Regulatory Authority (FINRA) isn’t impressed by Charles Schwab Corp.’s efforts to try and get a federal judge to throw out disciplinary actions levied by the regulator on Schwab in a case involving its client arbitration agreements. The agreements, which were distributed to nearly 7 million Schwab customers in October 2011, prohibited them from starting or joining any class-action lawsuits against the firm.

FINRA contends that such agreements are a violation of its arbitration rules, and subsequently filed a disciplinary action against Schwab on Feb. 1.

Schwab then sought an injunction in federal court to halt FINRA’s action.

A hearing on the matter is set for April 3.

An arbitration agreement requiring clients to waive their rights when it comes to pursuing a class-action lawsuit against their brokerage apparently is unique. FINRA spokeswoman Michelle Ong stated in a Feb. 24 Investment News article that she is unaware of any other brokerage firms using agreements like Schwab’s.