FINRA reminded member firms that FINRA Rule 2268 ("Requirements when Using Predispute Arbitration Agreements for Customer Accounts") establishes minimum disclosure and other requirements as to mandatory arbitration provisions in customer agreements.
Specifically, FINRA reminded firms that customer agreements cannot:
- be used to restrict the location of an arbitration hearing (see FINRA Rule 12213, "Hearing Locations");
- be used to change the statute of limitations, as FINRA Rule 12206 ("Time Limits") provides a six-year time limit for arbitration claims to be submitted;
- limit a customer's right to pursue a class action in court, as set forth in FINRA Rule 12204 ("Class Action Claims");
- limit the ability of (i) a customer to file a claim or (ii) the arbitrators to make an award, as per FINRA Rule 2268(d); or
- contain indemnification or hold harmless provisions that limit a customer from bringing a claim or receiving an award. FINRA stated that such provisions would also violate FINRA Rule 2010 ("Standards of Commercial Honor and Principles of Trade") to the extent that they seek indemnity of costs or penalties relating to the firm or associated person's violation of the securities laws or FINRA rules.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.