Court dismisses challenge to FINRA rule against class-action bans

FINRA, the self-regulatory organziation for securities firms in the U.S., runs an arbitration system in which individual investor disputes go to arbitration, but brokers are not permitted to ban class actions. Rather, investors can pursue class actions in court. Relying on AT&T Mobility v. Concepcion and CompuCredit v. Greenwood, Schwab challenged FINRA's rules, asking a court either to hold that the rules permitted Schwab to ban class actions by its investors or, in the alternative, to strike down FINRA’s rules. On Friday, the district court granted FINRA's motion to dismiss Schwab’s suit on the ground that Schwab did not exhaust its administrative remedies prior to going to court. The opinion (courtesy of the Securities Law Prof blog) does not resolve the merits of the challenge.