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State Regulators Seek to Ban Mandatory Arbitration of Adviser Disputes

The North American Securities Administration Association, Inc. (“NASAA”), comprised of securities administrators from all 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Canada, and Mexico, issued its legislative agenda for the upcoming year.

NASAA’s President and President-elect jointly announced that the NASAA will focus its efforts on obtaining legislation in the following areas: 1) banning the use of pre-dispute mandatory arbitration clauses in contracts between state-registered investment advisers and their clients; 2) authorizing the SEC to collect user-fees from federally-registered investment advisers; and 3) allowing victims of crowd-funding fraud to bring class action litigation.

The NASAA said its biggest priority is legislation that would allow harmed investors to seek relief in any forum. In addition to efforts to end pre-dispute mandatory arbitration clauses, the NASAA is supporting FINRA’s appeal of a hearing panel’s finding that FINRA could not block Charles Schwab & Co.’s use of account agreement clauses that would foreclose its customers’ ability to bring class action claims.

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