NASAA Wants Investment Advisers To Be Banned From Forcing Clients Into Mandatory Arbitration

The North American Securities Administrations Association Inc. wants Congress to put into place a law to bar investment advisers from making clients go through arbitration to resolve their securities claims. They also want lawmakers to make either the SEC propose a rule that would get rid of the pre-dispute arbitration clauses currently found in broker firm contracts or push for similarly purposed legislation. The association recently unveiled its legislative priorities, which includes getting a discourse going about a recent FINRA panel ruling that found that the self-regulatory organization could not prevent Charles Schwab Corp. (SCHW) from using agreements that include mandatory pre-arbitration clauses to bar clients from taking part in class action securities cases.

NASAA President Heath Abshure has spoken about how giving investors options when it comes to settling claims is key to making them feel more confident about the financial markets. He said that when seeking relief they should have the option of going to the forum of their choice. The association also wants there to be legislation that would let the SEC impose user fees when investment advisors take exams (The group’s members believe this would enhance adviser oversight), as well as a law that would let crowdfunding victims file class action securities lawsuits. Crowdfunding involves using the Internet to sell securities in small batches to nonaccredited investors.

NASAA is hoping that the significant turnover that occurred in both the House and the Senate will give the organization a chance to generate new support.

State and provincial securities regulators belong to this group. NASAA has protected investors on Main Street from fraud for about a century. It is the longest running international investor protection group.

More About the FINRA Panel’s Ruling on the Charles Schwab Case
FINRA itself has said that it will appeal this ruling, which lets Charles Schwab make customers waive their right to participate in these types of lawsuits. The panel found that while Schwab’s actions do violate FINRA rules, the SRO’s rules actually violate the National Arbitration Act. A spokesperson for Schwab has said that the financial firm will now likely seek to get the pending class action securities cases against it thrown out. Meantime, FINRA has 45 days to appeal the panel decision before the National Adjudicatory Council.

Investment Adviser Fraud
If you think you may have sustained financial losses because of investment adviser fraud, contact our securities fraud law firm right away and ask for your free case evaluation. You may be able to recoup your losses. At Shepherd Smith Edwards and Kantas, we represent clients both in arbitration and before the courts. We are dedicated to helping investors recover what they are owed.

Related Web Resources:
State securities cops seek bill to ban pre-dispute arbitration for advisers, Investment News, March 5, 2013


National Adjudicatory Council

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