The Eighth Circuit Court’s rejection of a proposed class-action lawsuit from investors who accused TD Ameritrade of securities fraud is disappointing, denies investors their day in court, and inappropriately insulates the industry from meaningful scrutiny and accountability.
Last week, the U.S. Court of Appeals for the Eighth Circuit sided with the brokerage firm which said that class certification is inappropriate because damages must be calculated on an individual basis and not class wide.
Why this matters? The decision will cause tens of millions of investors to continue to lose tens of billions of dollars a year as the anti-investor decision will help perpetuate a system of legalized bribery in our stock markets. In addition, denying class-action relief could set a dangerous precedent as these actions play an essential role for many individuals. It really is the only realistic means of recovering damages and holding firms accountable for abusive practices as individual lawsuits are unable to address the scope and nature of the harms inflicted. Worse, many firms require their customers to address any disputes in arbitration, so-called “forced arbitration clauses,” which is secret, biased, and virtually always unfair to investors.
What we said. Better Markets filed an amicus brief in 2019 in support of investors getting their day in court via a class-action lawsuit alleging that brokers routinely violate their duty to seek the best execution for their clients’ trades. Instead, they route orders to maximize payments from exchanges and others—instead of working to serve their clients’ best interest via best execution. We also pointed out the essential role of class action relief as the only realistic means of recovering damages and holding firms accountable for these abusive practices.
Bottom line. The outcome in this case confirms the urgent need for policymakers and regulators to put a stop to this corrupt system. It is now more important than ever that the SEC, and, if necessary, Congress, investigate and end these abusive practices.
Read our press release.