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FINRA Department of Enforcement v. Charles Schwab & Co., Inc.  

The Charles Schwab Corporation
2014

In a closely watched matter of first impression, our attorneys successfully obtained a FINRA hearing panel’s decision that FINRA’s enforcement division cannot block a broker-dealer from including class action waivers in its customer arbitration agreements.

Charles Schwab & Co., had amended its customer agreements to include such waivers in October 2011, soon after the U.S. Supreme Court ruled in AT&T Mobility v. Concepcion that a California restriction on class action waivers ran afoul of the Federal Arbitration Act.  Although the FINRA panel on February 21, 2013 found that the client's waivers may have violated FINRA's own rules, it concluded that the agency could not enforce those rules because they are pre-empted by the FAA.

Gil Serota served as lead counsel for Schwab and argued the case before the disciplinary panel.  For his lead role and what it called a "major victory" in the Schwab ruling, the Am Law Litigation Daily named Mr. Serota "Litigator of the Week."  FINRA Enforcement appealed the decision to its National Adjudicatory Council.  While the appeal was pending, Schwab and FINRA Enforcement resolved the matter such that Schwab agreed to remove its class action waiver from customer agreements.

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