Facts

The Dept. of Enforcement filed a complaint against Charles Schwab & Co. Inc.

COMPLAINANT'S CONTENTIONS:
The department contended that Charles Schwab violated the NASD and FINRA rules by adopting a class action waiver, providing that customers could not file or participate in any manner in class actions against the firm and that arbitrators do not have the authority to consolidate more than one party's claims.

RESPONDENT'S CONTENTIONS:
Charles Schwab denied the department's allegations, and asserted various affirmative defenses.

Result

A Disciplinary Panel first issued a decision finding in favor of Charles Schwab on two of the claims and in favor of the Dept. of Enforcement on a third claim relating to consolidation. The Panel agreed with Schwab and that the Federal Arbitration Act barred the Dept. of Enforcement's first two claims. Both sides appealed to the FINRA National Adjudicatory Council. Simultaneous with issuance of a final decision by the FINRA Board of Governors, Charles Schwab agreed not to appeal the decision and to settle the charges. As part of the settlement, Charles Schwab agreed to pay $500,000 in fines and the withdrawal of its class action waiver.