Prof. Jill Gross quoted in Investment News about a recent Charles Schwab Lawsuit

Professor Jill Gross commented in Investment News on a recent Charles Schwab lawsuit

The large brokerage firm, Charles Schwab, is attempting to avoid a class-action lawsuit by requiring that customers file their claims in FINRA arbitration forums. According to a disclosure agreement, the FINRA proceedings would bar customers from combining their suits, despite the fact that arbitration procedures usually allow such practice. Schwab is basing the argument on the 1925 Federal Arbitration Act which upholds agreements to arbitrate in private dispute resolution systems.

Professor Gross said, “The outcome will hinge on whether the FAA trumps the Securities and Exchange Act of 1934, which gives the SEC rule-making authority over FINRA, including its arbitration program.”

Schwab acknowledges the Securities and Exchange Act, although it contends that the rule does not apply to the issue in this case. The case is pending in California federal court.