Jake Zamansky Quoted on FINRA Decision Blocking Class Actions for Investors
FINRA arbitration attorney Jake Zamansky was quoted in IFLR (International Financial Law Review) on February 26. Some excerpts from the article are below. The full article, “FINRA Signals the End of Class Actions for Brokers,” is available here.
Note: Finra stated its intention to appeal the decision after the article was published.
Brokerages can prohibit class action lawsuits by their customers following a landmark decision last Thursday that left single-claim arbitration as the only arena for disputes between brokers and investors.
“It’s hard for me to justify bringing a case unless an individual has a loss of at least $100,000,” said Jacob Zamansky, a lawyer specialising in securities arbitration and founder of Zamansky LLC.
“I think every major brokerage firm is instructing their lawyers to change their customer agreements to include a clause such as the one that Schwab has forced down investors’ throats.”
The decision was in response to a complaint filed by Finra on February 1 against Charles Schwab for amending its customer agreements to prohibit class actions in October 2011, months after the AT&T decision. The brokerage firm had just paid a $235 million settlement to investors over a class action lawsuit brought on grounds the company gave misleading advice in relation to its YieldPlus fund.
Zamansky said some of the class action claimants in that case only suffered modest losses and probably would not have pursued damages in absence of the class action option.
“When you have a modest dollar loss spread over thousands of people it doesn’t behoove anybody to do the case individually,” Zamansky said.
While Finra saw its rules on class actions struck down, the hearing panel did affirm an arbitrator’s authority to consolidate individual claims in arbitration. Finra has not publicly stated its intended response to the decision but interested parties expect the self-regulatory organisation (SRO) to appeal.
“I expect this to go all the way up to the US Supreme Court,” Zamansky said. “This is a very big issue affecting millions of investors.”
Jake Zamansky is the principal of the firm Zamansky LLC, FINRA arbitration attorneys who represent individual and institutional investors who have lost money as a result of their brokerage firms’ fraud or unsuitable recommendations.