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Archive for the ‘FSA’ Category


FINRA files complaint against Charles Schwab

Wall Street’s own watchdog filed a complaint against Charles SchwabCorp on Wednesday accusing the online brokerage of requiring customers to waive their rights to pursue class actions against the firm, a violation of industry rules.

The Financial Industry Regulatory Authority alleged that San Francisco-based Schwab added a new provision in October to more than 6.8 million customer account agreements that would preclude them from starting or joining class-action lawsuits against the brokerage, according to FINRA’s complaint.

Schwab also required customers to agree that industry arbitrators would not have the authority to consolidate claims from multiple parties. These types of consolidated cases are common, but typically include far fewer claimants than those in a class action court cases.

FINRA, in addition to being Wall Street’s regulator, runs the arbitration forum where customers and brokerage firms typically must resolve legal disputes. FINRA arbitration rules do not allow arbitrators to hear class action cases.

The rules also restrict brokerages from limiting investors’ rights to file cases in court in situations that arbitration rules allow, such as in class actions.

Schwab’s agreement would effectively leave investors in a bind, in which many would not have access to a legal process for recovering their losses, say lawyers.

FSA Investigates Lehman Structured Product Sales

The FSA and Financial Ombudsman Service said in a press release yeasterday they have jointly concluded that Lehman Brothers’ insolvency raises issues in the UK structured products market.

The release said: “As a result, while the Ombudsman has been investigating a number of individual complaints, the FSA has been actively looking at the wider issues raised in this market.”

The FSA and Ombudsman have agreed that the regulatory options available to the FSA would be one way of reducing consumer detriment, as well as potentially being able to deal with the concerns of more consumers than those who have complained to the Ombudsman.

Therefore, they have agreed that the FSA will now consider issues relating to Lehman-backed structured products under the “wider implications” process, in order to allow the FSA to explore all options to achieve the best outcome for consumers.

Many in the industry concede clients have not been well served by structured product providers, particularly in the retail market where fees are notoriously high. “As much as 80% of the structured products world doesn’t deliver good value to investors,” says Chris Taylor, chief executive of Blue Sky Asset Management, speaking to Wealth Bulletin last year.

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