March 12, 2019 Articles

Circuit Split Widens over Waiver of FINRA Arbitration Rights

Four circuit courts of appeals are split over whether a forum selection clause related to “all actions and proceedings” encompasses FINRA arbitration.

By Beth Graham

A circuit split has recently widened regarding whether a securities broker-dealer may use a forum selection clause to deny clients access to the Financial Industry Regulatory Authority (FINRA) arbitral forum. Under FINRA Rule 12200, a dispute between a “member or associated person of a member” and a “customer” must be arbitrated at the customer’s request so long as the dispute “arises in connection with the business activities of the member or the associated person.” Broker-dealer attempts to avoid FINRA arbitration are being met with mixed results in the circuit courts of appeals.

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