Rep. Ellison Introduces Investor Choice Act of 2017
Rep. Keith Ellison introduced the Investor Choice Act of 2017 (H.R. 585) today, a bill to end pre-dispute mandatory (or “forced”) arbitration agreements and ban prohibitions on class action lawsuits in customer service contracts between investment advisers and broker-dealers and their clients.
“Working Americans should not have to sign away their rights in order to work with a financial advisor or broker dealer to build a secure retirement,” Rep. Ellison said. “An investor’s right to recover monetary damages through legal action is critical. The Investor Choice Act helps level the playing field. Working Americans will be more eager to invest their hard earned dollars when we give them more rights in the financial marketplace. By removing unfair advantages, we can create jobs and strengthen our economy while enabling families to build a secure retirement.”
Class action prohibitions and pre-dispute mandatory arbitration contracts require investors submit to arbitration if they feel wronged, surrendering their right to seek recourse in a court or in front of a jury. Since such agreements are required prior to a dispute even occurring they compel investors to unconditionally waive these rights even before the facts and circumstances of a dispute are known.
The Investor Choice Act would not in any way limit or restrict the ability of investors to voluntarily agree to arbitrate any disputes with their broker or investment advisers, should they wish to do so after the facts and circumstances of the dispute are known.
Since this bill was first introduced in 2013, federal agencies have taken steps to provide greater protection for investors. For example, the Department of Labor published its “fiduciary duty” rule which required that all financial professionals who give retirement investment advice must put their client’s best interest first. This common-sense requirement, called the fiduciary standard, is the most significant public policy advance in retirement savings in decades. In addition, the Consumer Financial Protection Bureau proposed a rule that prohibits mandatory arbitration clauses in financial products like credit cards and bank accounts that generally prevent consumers from joining together to sue their bank or financial company for wrongdoing.
This bill was cosponsored by Representatives Michael Capuano (MA); Stephen Lynch (MA); Gregory Meeks (NY); Louise McIntosh Slaughter (NY); Raúl Grijalva (AZ); Denny Heck (WA); Betty McCollum (MN); Jim McGovern (MA); Mark Pocan (WI); Jan Schakowsky (IL); and José Serrano (NY).
Organizations supporting the Investor Choice Act: American Association for Justice (AAJ); Americans for Financial Reform (AFR); Center for Justice & Democracy (CJ&D); Consumer Action; Consumer Federation of America (CFA); Consumers for Auto Reliability and Safety (CARS); D.C Consumer Rights Coalition; Homeowners Against Deficient Dwellings (HADD); National Association of Consumer Advocates (NACA); National Association of Shareholder and Consumer Attorneys (NASCAT); National Consumers League; National Employment Lawyers Association (NELA); North American Securities Administrators Association (NASAA); Public Investors Arbitration Bar Association (PIABA); Public Citizen; and U.S. PIRG.