The North American Securities Administrators Association (NASAA) has filed an amicus brief supporting an effort by the U.S. self-regulatory organization, the Financial Industry Regulatory Authority (FINRA), to stop a brokerage firm from preventing its clients from participating in class action lawsuits.

NASAA says it’s supporting FINRA’s effort to overturn a decision by a hearing panel to allow brokerage firm, Charles Schwab & Co., to prevent its customers from participating in class actions. Its brief was filed with FINRA’s committee that reviews initial decisions rendered in FINRA disciplinary and membership proceedings; and, it says that similar briefs were filed by several advocacy groups.

The regulatory group argues that the hearing panel erred by refusing to enforce FINRA rules prohibiting the use of class action waivers in customer agreements. “In doing so, the hearing panel ignored FINRA’s [statutory] duty to enforce the organization’s rules, relied on an erroneous application of the Federal Arbitration Act, and placed investors in imminent harm by precluding their ability to seek redress for small dollar claims,” NASAA’s brief says.

“Charles Schwab’s attempt to unilaterally alter its account agreements to include the class action waiver is an obvious attempt by the firm to insulate itself from liability to its own clients,” said Heath Abshure, NASAA president and Arkansas securities commissioner. “This ruling would essentially allow broker-dealers to prohibit participation in class actions against them by their customers. That’s wrong on the merits and bad public policy.”

“Our interest in this case stems from our strong belief that investors should be free to join with other investors through the representative class action process to resolve claims that are too costly to bring independently,” Abshure added.

Separately, NASAA reports that it wrote to the new chair of the U.S. Securities and Exchange Commission (SEC), Mary Jo White, urging her to use the SEC’s authority to prohibit, or impose limits on, the use of mandatory arbitration clauses in broker-dealer and investment adviser customer contracts. In the letter, NASAA says “it is essential” for the SEC to act, given this case.