Charles Schwab announced that it has modified its account agreement to eliminate the class action waiver section. Schwab believes that arbitration is still the best method to resolve disputes, but it removed the class action waiver after some clients expressed uncertainty about their rights with respect to disputes with Schwab following a recent Financial Industry Regulatory Authority (FINRA) hearing panel decision.
After paying $235 million to settle a misleading marketing suit last year, San Francisco-based brokerage company Charles Schwab asked "its almost nine million clients to sign new account agreements" that waived their class action rights, Reuters reports. Since then, a FINRA hearing panel determined that while this policy violates FINRA rules, it was consistent with "federal law and recent Supreme Court interpretations of the Federal Arbitration Act."
FINRA is appealing the decision to its internal appellate authority. Schwab announced in a statement last week that while FINRA appeals the decision, the company will temporarily reverse its class action waiver requirement until the legal and regulatory process is completed.
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