Will Brokerages Demand Protection From Lawsuits?

Barron's (October 26, 2017) - Consumers won’t be able to sue banks and credit-card companies, thanks to Congress. And some predict they’ll soon be blocked from suing brokerages as well, reports InvestmentNews.

On Tuesday, the Senate voted down the Consumer Financial Protection Bureau’s rule on class-action lawsuits. Finra has a similar policy, which forbids so-called class-action waivers in agreements between broker-dealers and clients. It’s a good bet the broker-dealers Finra regulates will soon be testing the rule, according to the publication.

“I don’t doubt for a minute that (Finra chief) Robert Cook is hearing this morning from multiple firms with respect to the waiver removal issue,” Andrew Stoltmann, president of the Public Investors Arbitration Bar Association, tells InvestmentNews.

The question now, according to Barbara Roper, director of investor protection at the Consumer Federation of America, is whether a firm “would put the class-action ban in a contract and either force Finra to back down or litigate it and see how it plays out.”

It’s not likely that Finra will unilaterally change its policy, George Friedman, former director of Finra arbitration, tells InvestmentNews. “I think there will definitely be pressure from the industry, saying, ‘Take a look at this,” he says. “Things have changed.’”