Financial Advisor IQ (February 3, 2022) - The Public Investors Advocate Bar Association is calling for an investigation of the Financial Industry Regulatory Authority’s arbitration process after a judge in Georgia ruled that Wells Fargo was able to influence the selection of the arbitrators appointed by the industry’s self-regulator.

On January 25, Judge Belinda Edwards of the Superior Court of Fulton County of the State of Georgia granted a motion brought by Brian Leggett and Bryson Holdings to vacate a 2019 arbitration award in Wells Fargo’s favor that denied Leggett’s claim of more than $1.1 million in losses as a result the actions of a Wells Fargo advisor, according to court documents. Wells Fargo Advisors and Jay Windsor Picket III, who has been registered with the wirehouse since 2012, were named as respondents in that lawsuit.

Edwards ruled that “Wells Fargo and its counsel manipulated the Finra arbitrator selection process.”

According to the court document, Wells Fargo and its counsel, Terry Weiss, admitted that Finra provided Weiss with a “subset” of arbitrators in which at least three are removed from the list provided to claimants.

“Permitting 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,” Edwards wrote.

Piaba, in calling for an investigation, says that the “secret agreement undermines the very neutrality of the computerized system” set up in 1998. The group also notes that the “surprising revelation” about the Finra arbitration process comes a little over a month after the U.S. Government Accountability Office called for more stringent SEC oversight of Finra.

Piaba says it wants an immediate Securities and Exchange Commission investigation as well as Congressional hearings about Finra’s arbitration forum.

Finra denies the allegations of corruption.

“There has never been any agreement between Finra Dispute Resolution Services and attorney Terry Weiss regarding appointment of arbitrators. Any assertions to that effect are false,” according to a Finra spokesperson.

“We have reviewed all cases involving Terry Weiss as counsel, and none of the three arbitrators in question was excluded or removed from ranking lists prior to sending the lists to the parties. In fact, in the case at hand, arbitrator [Fred] Pinckney, an arbitrator who served on the [Joan] Postell case, was on the list sent to the parties.” The Postell case was a previous, unrelated Finra arbitration case.

According to Judge Edwards, the “only reason this secret agreement came to light was because Finra accidentally included one of the three Postell arbitrators, Fred Pinckney, on the neutral computer-generated List.”

Wells Fargo, meanwhile, also defends the arbitration process and its actions and says it plans to fight Edwards’ ruling.

“We adamantly deny all of the allegations cited in this decision,” according to a Wells Fargo Advisors spokesperson.

“Finra has well-established rules for admitting arbitrators to its roster and the process is fair to all parties. Wells Fargo Advisors followed this process, and both parties had the opportunity to make arguments regarding each of these issues to the arbitrators and to FINRA. We intend to appeal this decision.”

— with additional reporting from Rita Raagas De Ramos