Article by: Clint Hale

42 PEPP. L. REV. 109 (2014)

“Does the FAA limit the ability of federal regulators acting pursuant to congressional authority to impose conditions and limitations on the use of arbitration provisions in order to ensure fairness?” This Comment answers that question in the affirmative and argues that recent Supreme Court precedent, circuit court decisions in contexts similar to FINRA’s oversight of the securities industry, and investors’ true interests all instruct that Schwab’s class action waiver should have been enforced over FINRA’s contrary command. Part II discusses FINRA’s role in the securities industry, the FAA and recent Supreme Court precedent interpreting the FAA, and the FINRA Rules that Schwab’s class action and joinder waiver violated. Part III analyzes why the conflict between the FAA and FINRA’s rules should have been resolved in favor of the FAA and supports this argument with discussion of federal circuit court decisions in contexts analogous to the securities industry. Part IV addresses the fears voiced by investor protection advocates and articulates the policy reasons in support of enforcing the class action waiver, arguing that its enforcement would have actually benefited investors. Part V concludes.

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