Feb 2 (Reuters) - The head of Charles Schwab Corp on Thursday said the company will reimburse customers for arbitration fees in cases they file against the brokerage while a California federal court sorts out a legal dispute related to a regulatory action involving the company.

"We have a fundamental disagreement" with the Financial Industry Regulatory Authority, said chief executive Walt Bettinger during a winter business update for institutional investors and analysts.

The company and its regulator are at odds, he said, over the interpretation of a Supreme Court case concerning class-action lawsuits and whether it takes precedence over FINRA rules.

FINRA, Wall Street's self-watchdog, filed a complaint against San Francisco-based Schwab on Wednesday accusing the online brokerage of requiring customers to waive their rights to pursue class actions against the firm, a violation of industry rules. Schwab also required customers to agree that industry arbitrators would not have the authority to consolidate claims from multiple parties.

The waiver effectively leaves many smaller investors without a legal process for pursuing their losses, lawyers said. Investors with small claims, say $25,000, join class-action suits to recover their money. Some also file FINRA arbitration claims as part of a small group of investors, which Schwab's agreement would prohibit. Investors may be hesitant to file an individual claim for a relatively small loss, lawyers said.

Schwab responded to FINRA's action by filing a federal court action, also on Wednesday, asking the U.S. District Court for the Northern District of California to declare the provisions are enforceable under federal law and recent decisions by the U.S. Supreme Court, according to court documents.

The company, in the wake of FINRA's action, may be trying to deflect a perception that it is insensitive to small investors.

"We don't want smaller clients to think they're under some barrier to being able to file arbitration claims if they feel they have a viable claim," Bettinger said. "Until we get this resolved, we're going to reimburse the filing fee for anyone who files a claim."

His plan did not appease some investor advocates. "It doesn't really address the underlying problem," said Jill Gross, director of the Investor Rights Clinic at Pace Law School in New York. "Investors may want the ability to proceed in a different forum and they're deprived of that ability," Gross said.

Arbitration filing fees, which are set by FINRA, are determined based on the amount of an investor's claims. For example, a $975 fee applies to claims over $50,000 and up to $100,000. Bettinger did not discuss details for getting those funds back to investors.

Those fees are just "the tip of the iceberg" in arbitration cases, said Philip Aidikoff, a securities arbitration lawyer at Aidikoff, Uhl & Bakhtiari in Beverly Hills, Calif.

"If I'm an investor, it ends up creating a situation that costs me money," said Aidikoff, adding that the terms of Bettinger's offer are not yet clear. Expert witness fees and attorney time are other considerations in the process, according to Aidikoff.

"In my view, Schwab's position is completely inappropriate, Aidikoff said.

That position, however, has nothing to do with clients, according to Bettinger. "This is an issue between us and our regulator, not between Schwab and our clients," Bettinger said.

(Reporting by Suzanne Barlyn and Joseph A. Giannone)

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