By Suzanne Barlyn and Jed Horowitz
Feb 26 (Reuters) - The Financial Industry Regulatory
Authority will appeal a ruling that allowed Charles Schwab Corp
to require customers to waive their right to
participate in class-action suits, a spokeswoman said on
Tuesday.
"We are in the process of filing an appeal," a FINRA
spokeswoman told Reuters in an emailed statement. The decision
comes after a hearing panel decision last Thursday that upheld
Schwab's late 2011 move to require clients to waive their
class-action rights. Schwab's action violates FINRA's rules, but
the rules themselves violate the National Arbitration Act, the
panel found.
A Schwab spokesman did not immediately return a call
requesting comment about the appeal. Earlier Tuesday the
spokesman said Schwab will likely seek dismissal of pending
class-action cases given its victory before the hearing panel.
FINRA, Wall Street's self-regulator, had 45 days to appeal
to its National Adjudicatory Council, an appellate body for
FINRA disciplinary decisions.
Class-action suits are the most common way for investors
with small cases to try to recoup losses stemming from alleged
wrongdoing by Wall Street brokerages, say lawyers. Brokerage
agreements usually require investors to resolve legal disputes
in FINRA's securities arbitration forum - an option that
investors with small cases often find too costly to pursue, they
say.
Schwab in 2010 agreed to pay $235 million to settle class-
action litigation related to misleading marketing of its
YieldPlus money-market fund between May 2006 and March 2008.
FINRA prevailed in one part of last week's hearing panel
decision. It said Schwab could not bar arbitrators from
combining individual arbitration claims into group hearings, and
fined Schwab $500,000 for including the group ban in its
customer agreements. The sanction will be stayed while the
appeal is pending, the FINRA spokeswoman said.
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