Schwab Case Spotlights Lack of Rights for Investors on Wall Street
Today, the New York Times highlighted a controversial move by Charles Schwab to evade accountability by eliminating investors’ rights. Earlier this year, Schwab announced they would use a forced arbitration clause in the fine print of their contracts to wipe-out their clients’ rights to join together in class actions.
Class actions are essential to Wall Street accountability. Class actions are often the only opportunity for justice when billion dollar corporations rip-off investors or steal smaller amounts of money. By eliminating class actions through a forced arbitration clause, Schwab is attempting to grant itself a license to steal and violate the law.
The article points out that this contentious move by Schwab has implications for all of Wall Street:
…the skirmish has inadvertently brought fresh and unwelcome attention to the investor arbitration process and its flaws, and could severely curtail efforts by investors hurt by widespread problems…
When corporations rip off investors for smaller amounts of money, it is very difficult for individuals to find the time and resources it takes to hold a corporation accountable on their own. If the stakes of individual lawsuits are just too high for one investor, class actions make access to justice feasible. Banning class actions would effectively bar investors from holding Schwab accountable.
The New York Times also highlights the problems already in the system because investors are being forced into arbitration:
The issue has cast a harsh spotlight on the arbitration process of the entire securities industry. Although Finra is taking the side of the small investor in the Schwab case, the organization is often depicted as soft on the industry that underwrites its operations.
The group’s critics point out that the selected arbitrators do not have to follow the law, rarely permit depositions and typically do not award punitive damages.
Most Americans can agree the financial industry needs more accountability, not less. Banning class actions allows corporations to get away with widespread violations of federal and state laws and hide wrongdoing from the public.
Tell Congress to protect Americans’ financial security and stop the use of forced arbitration.