'Concepcion's' Lasting Effects: Class Action Waivers Preempt FINRA Rules

April 29, 2013  |  New York Law Journal

In our June 24, 2011, article for NYLJ Outside Counsel, titled "How 'AT&T Mobility' Changes the Course of Securities Class Actions, Arbitrations," we discussed the then-recent U.S. Supreme Court decision in AT&T Mobility v. Concepcion and predicted that Concepcion, which held the Federal Arbitration Act (FAA) preempts state law defenses to contractual class action and arbitration waivers, would likely lead to a conflict between the FAA and long-standing FINRA rules prohibiting member firms from compelling class litigants to arbitrate their disputes. This article discusses an opinion issued by a FINRA Hearing Panel, in the matter of Department of Enforcement v. Charles Schwab & Co., holding that, consistent with Concepcion, the brokerage could not be penalized by FINRA for inserting a class action and arbitration waiver provision into their customer agreements.

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