NEW YORK Feb 21 A regulatory panel fined
Charles Schwab Corp $500,000 for attempting to limit
arbitrators' ability to consolidate client complaints, but said
Schwab could not be fined for restricting clients from
participating in class-action suits against the brokerage firm.
The Financial Industry Regulatory Authority (FINRA) last
February charged Schwab with violating its rules by adding
class-action and arbitration limitations to its customer account
A FINRA hearing panel on Thursday dismissed two of the three
complaints regarding the class-action language. Although
Schwab's language violates FINRA rules, the rules cannot be
enforced because they conflict with the Federal Arbitration Act,
the panel ruled.
The panel upheld the third FINRA complaint concerning
Schwab's attempt to prevent arbitrators from consolidating
client complaints. The federal arbitration law does not dictate
how an arbitration forum should be governed and operated, and
does not prohibit consolidation of individual claims, it ruled.
In addition to the $500,000 fine, it ordered Schwab to take
corrective action and remove the violative language from its
"Schwab is pleased with the panel's decision, which ruled in
the company's favor on the central class action waiver issue,"
Schwab said in a prepared statement. "The company believes
customers are better served through the existing FINRA
arbitration process and that class-action lawsuits are a
cumbersome and less effective means of resolving disputes - for
Schwab in January removed the provision limiting arbitration
hearings that consolidated complaints, a Schwab spokesman said.