The Consumer Financial Protection Bureau (the “CFPB”) issued a final rule on July 10, 2017 that has received widespread attention.[1] The rule, promulgated pursuant to section 1028(b) of the Dodd-Frank Act, generally regulates “arbitration agreements in contracts for specified consumer financial products and services.”[2] More specifically, the rule prohibits the use of arbitration agreements by providers of certain financial products and services “to bar the consumer from filing or participating in a class action.”[3] Despite the apparent wide sweep of the rule, it includes important exemptions for broker-dealers and investment advisers.

First, the rule expressly exempts from its prohibitions “broker-dealers and investment advisers, as well as their employees, agents, and contractors, to the extent regulated by the SEC.”[4] Also, the rule exempts those “regulated by a State securities commissioner as a broker-dealer or investment adviser.”[5] As a result of these exemptions, the use of arbitration agreements by broker-dealers and investment advisers will continue to be regulated by the SEC and state regulators. So far, the SEC has not exercised its authority under section 921 of the Dodd-Frank Act to restrict the use of arbitration agreements as the CFPB has done, and there is no indication it will do so soon.[6]