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FINRA hires firm to conduct independent review of arbitrator selection process

On Behalf of | Feb 28, 2022 | FINRA Compliance

The Financial Industry Regulatory Authority announced that it has hired a law firm to conduct an independent review of its procedures for selecting arbitrators in a recent court case, InvestmentNews reports.

Last month, Fulton County Superior Court Judge Belinda E. Edwards vacated a decision by FINRA arbitrators in favor of Wells Fargo in a dispute with a former client. Edwards said that FINRA had permitted Wells Fargo and its counsel to manipulate the arbitrator selection process.

The judge asserted that Wells Fargo and its counsel had insisted on having three potential arbitrators removed from a randomly selected ‘neutral’ list prior to actual arbitrator selection.

FINRA has now hired the Lowenstein Sandler law firm to review how FINRA Dispute Resolution Services (DRS) complied with its rules, policies and procedures for arbitrator selection. DRS administers an arbitration forum to assist in the resolution of disputes involving investors, securities firms and their registered employees.

“FINRA recognizes the importance of maintaining trust in the system and is committed to ensuring the DRS arbitration forum is operated in a fair and neutral manner,” said FINRA President and CEO Robert Cook. “In keeping with that commitment, FINRA’s Audit Committee has engaged an independent, outside party to review how the arbitrator selection process was carried out in this case, and to determine whether any improvements to the process may be warranted.” He said the results would be made public.

The review will be led by Christopher Gerold, a partner in Lowenstein’s Securities Litigation and Corporate Investigations & Integrity Practice Groups. He will report the findings to the Audit Committee of FINRA’s Board of Governors.

The attorneys at Lewitas Hyman have resolved financial services matters nationwide through arbitration and litigation. We have handled hundreds of arbitrations before FINRA, the Chicago Board Options Exchange, the Chicago Board of Trade, JAMS, the American Arbitration Association and other self-regulatory organizations. For more information about our arbitration and litigation services, please contact us at (888) 655 6002 or through our online contact form.