By Dow Jones Business News, February 26, 2013, 11:12:00 AM EDT
By Lauren Pollock
The secretary of the commonwealth of Massachusetts criticized Charles Schwab Corp. ( SCHW ) Tuesday for a recent change
to its customer arbitration agreement that prevents its customers from joining class-action lawsuits and called for the
discount brokerage to change its policy.
Secretary William Galvin called it disingenuous for the company to say customers are better served by the Financial
Regulatory Authority arbitration process and that class-action lawsuits are a less effective means of resolving
A representative from Schwab wasn't immediately available to comment.
Last week, a Finra hearing panel ruled that Schwab's amendment to its customers arbitration agreement violates Finra
rules, but the regulator can't enforce those rules because they are in conflict with the federal arbitration laws.
Secretary Galvin, the chief securities regulator for Massachusetts, called that ruling "akin to giving every rogue
broker-dealer the green light to steal from their customers in small dollar amounts."
He suggested the panel decision will lead other brokerage firms to follow suit and demand their customers give up
their right to file class actions against them, and then called on Schwab to change its practices.
Meanwhile, Secretary Galvin also advised investors to watch for changes in their brokerage accounts and to call their
brokers to object to any change in their rights to participate in class actions. He said he previously called on the
U.S. Securities and Exchange Commission to use its authority to preclude binding pre-dispute arbitration agreements.
Write to Lauren Pollock at firstname.lastname@example.org
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