Is it typical for an Investment Company Customer Agreement to ask you to waive your legal rights?

Question

My investment broker demands I sign a Customer Agreement with an arbitration clause preventing one from legal recourse for my companies 401K plan. He says that all Invest companies customer agreements have this clause in them. Is this true with all investment companies? Seems to me, that regardless of the service, consultant, investment or other, one should NEVER and I mean NEVER, give up their legal rights to anything.

Answer 1

Almost every contract I have seen has such a worthless clause in it.

I would not worry about it. If they did something bad, illegal or unethical, you can sue them no matter what.

What you want is that FREE TAX DEFERRED MONEY offered by their 401K.

Answer 2

Every brokerage firm has as part of it's Customer Account agreement, an Arbitration clause in it.

It does not preven you from legal recourse, but it is intended to bring all customer complaints to arbitration rather than in a civil court.

Civil courts very seldom have any understanding of the Securties Acts of 33 34 40 nor do they understand the relations of exchange and/ot FINRA rules,. therefore FINRA arbitration is the easiest and cheapest way to go,

You can alway bring legal action in the court system, but it will be extremely expensive, drawn out and even if the judgement is ruled in your favor, you will have go to court again since the broker can very easily appeal the ruling.

You should go with the Arbitration, since most arbitration cases rule in favor of the customer, as long as the customer did not violate any rules and regulations.

However, if you feel that strongly, then don't invest with any American Brokerage firm.

Answer 3

If you want to have a brokerage account or invest in any mutual fund you will have to agree to wave your right to a lawsuit and agree to binding arbitration. This is true with all US brokers and all US mutual funds.

catch 22.

You don't have to sign the agreement, but you wont get the account opened either.

Note:

If there is fraud or other criminal act conducted, you may be able to sue outside of the arb agreement. This will require an expensive attorney. For opening up an account, I would just know this is common with every firm in the USA.