Representing financial professionals, financial institutions and investors in investment loss, employment and disclosure matters, and in regulatory investigations nationwide.

Judge vacates FINRA award, finding Wells Fargo “manipulated” arbitration process

On Behalf of | Feb 8, 2022 | FINRA Compliance

A judge in Georgia has vacated a decision by Financial Industry Regulatory Authority arbitrators that went in favor of Wells Fargo, according to a report by AdvisorHub.

In her ruling issued Jan. 25, Fulton County Superior Court Judge Belinda E. Edwards said that FINRA had permitted Wells Fargo and its counsel to manipulate the arbitrator selection process. The case involved Wells Fargo Advisors client Brian Leggett, who filed a dispute with FINRA saying he had incurred over $1.1 million in losses because one of the firm’s brokers had not properly managed his account. His claim was denied by a panel of three FINRA arbitrators in 2019.

Under FINRA rules, the two sides in a dispute can strike names from a randomly selected neutral list of industry and public arbitrators until a final three are chosen.  But Edwards found there had been misconduct in Wells Fargo’s efforts to remove certain arbitrators from the case.

“The record here shows that Wells Fargo and its counsel, Terry Weiss, insisted on three potential arbitrators be removed from the neutral list itself, prior to arbitrator selection, without notification to any parties, in every case in which Terry Weiss appeared for any client,” she wrote.

The judge added that allowing one lawyer to “secretly red line the neutral list” raised questions about the neutrality and overall fairness of the arbitration system. Edwards vacated the arbitration award under the Federal Arbitration Act, finding that Wells Fargo had committed fraud.

Wells Fargo said it would appeal the ruling, saying the firm followed FINRA’s established rules for admitting arbitrators to its roster.

FINRA said it had reviewed the case and said that “none of the three arbitrators in question was excluded or removed from ranking lists prior to sending the lists to the parties.”

At Lewitas Hyman, our attorneys 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 nationwide. We have also appeared in courts throughout the United States in various types of securities-related matters. For more information about our arbitration and litigation services, please contact us at (888) 655 6002 or through our online contact form.