Today, the Columbia Law School Blue Sky Law Blog published a blog posting that I co-authored with Prof. Barbara Black (Cincinatti) with that question as the title. Click here to read our answer.
3 thoughts on “Do Broker-Dealers Have a Green Light to Force Investors to Waive Class Actions in Court?”
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The ability of FINRA to implement a securities arbitration regime that is focused on providing options for the securities disputant should not be lessened by removing the right for class actions in courts. While AT&T Mobility LLC v. Concepcion preempted state precedent in favor of the right to freedom of contract, the powers FINRA harbors are those of given by the Securities Exchange Act and the SEC. Further, the creation of a industry standard PDAA will allow a greater freedom to contract, but this freedom will be one sided with the power in the hands of the broker-dealer. This will remove options from the customer and will lead to restricting results the ruling FINRA officer may have not foreseen. In the era of Dodd-Frank it is important that the rights of the consumer should be robust and not automatically foreclosed in favor of the will of the broker-dealer.
I think it will be interesting to see what ultimately ends up happening in this area. But I think this issue highlights the struggle in balancing the court’s desire to continue to support arbitration and its benefits and the struggles of allowing class arbitrations to occur. Personally, I am against mandatory securities arbitration for class actions and believe that we should do more to protect investors. Either way, it will be interesting to see what ultimately ends up happening.
I read your joint comment on the decision. I keep saying that the firms need to be careful what they wish for. But so does PIABA. Courtroom litigation is much more expensive and moves at a glacial pace compared to arbitration. It will be interesting to see.