Financial Advisors IQ (February 11, 2022) - Sen. Elizabeth Warren, D-Mass., and Rep. Katie Porter, D-Calif., are calling on the Financial Industry Regulatory Authority to give details on its arbitration process after a judge in Georgia called it into question in relation to a case involving Wells Fargo.
Last month, Judge Belinda Edwards of the Superior Court of Fulton County of the State of Georgia ruled that “Wells Fargo and its counsel manipulated the Finra arbitrator selection process” and granted a motion to vacate a 2019 arbitration award in Wells Fargo’s favor, as reported.
According to court documents, Wells Fargo’s counsel, Terry Weiss, admitted that the self-regulator provided him with a “subset” of arbitrators in which at least three were removed from the list provided to the claimants.
Edwards ruled that allowing “one lawyer to secretly red line the neutral list makes the list anything but neutral, and calls into question the entire fairness of the arbitral forum.”
Following the ruling, the Public Investors Advocate Bar Association called for an investigation of Finra’s arbitration process.
Now, Warren and Porter want details on the communications between Wells Fargo’s lawyer and Finra officials as well as whether the company requested arbitrators to be removed from the case, the Wall Street Journal writes, citing a letter the lawmakers sent to Finra’s top executives on Wednesday.
“We have long had concerns about Finra’s ability to effectively enforce rules against fraudulent and abusive behavior by brokers and dealers,” they said in a Wednesday letter to Finra president and chief executive officer Robert Cook, according to the Journal.
The lawmakers also wrote that the case presents “troubling new allegations about the atrocious behavior of Wells Fargo,” according to the publication.
A Wells Fargo spokesperson tells the Journal that the firm followed rules in selecting the arbitrators in the case and plans to appeal Edwards’ ruling.
A Finra spokesperson previously told FA-IQ that there was no agreement between the self-regulator’s Finra Dispute Resolution Services and Weiss on the appointment of arbitrators.