Charles Schwab Corp has dropped a fight to require customers to waive their rights to participate in class action lawsuits, two sources said on Thursday.
Schwab has agreed to pay a fine to the Financial Industry Regulatory Authority for violating the regulatory group's arbitration rules when it barred its 9 million clients in 2011 from joining class actions.
A Finra hearing panel initially said in 2013 that Schwab's class action ban was valid under the Federal Arbitration Act, even though it violated the group's own rules. But an appeals panel within the regulatory group's legal hierarchy in recent days overturned the decision.
Schwab, the San Francisco-based pioneer of discount brokerage, could have fought the decision in court but decided it was more expedient to settle. It also failed to rally support from other companies in the securities industry, despite their long-held opposition to litigating in courts rather than in arbitration.