In an April 24th ruling that will have widespread impact among financial institutions, the FINRA Board of Governors held that a broker-dealer violated FINRA rules by including a mandatory class action waiver in its customer account agreements.
The Board decision reverses in part and affirms in part an earlier decision by a FINRA Hearing Panel which held that, while the firm’s customer class action waiver violated FINRA rules, those rules were unenforceable because they were preempted by the Federal Arbitration Act (FAA). The Board found that the firm’s class action waiver violated FINRA Rules 2268(d)(3) and (d)(1), which, in concert with Rule 12204 of FINRA’s Code of Arbitration Procedure for Customer Disputes, effectively ban the use of customer class action waivers by FINRA members.
To read the full alert, click here.