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Wells Fargo wins appeal of ruling on FINRA arbitration process

On Behalf of | Aug 10, 2022 | FINRA Compliance

A judge’s ruling that Wells Fargo Advisors manipulated the Financial Industry Regulatory Authority’s arbitration selection process has been reversed, reports InvestmentNews.

In a 3-0 decision last week, the Georgia Court of Appeals overturned a ruling by Atlanta Superior Court Judge Belinda Edwards. In January, Edwards vacated a decision by FINRA arbitrators who sided with Wells Fargo in the case of client Brian Leggett. Leggett said he had incurred over $1.1 million in losses because the firm’s brokers had not properly managed his account, and had not been adequately trained and supervised by Wells Fargo.

Edwards found that Wells Fargo and its counsel Terry Weiss had manipulated the arbitration process through a secret agreement with FINRA to bar certain arbitrators from hearing his cases, and she questioned the fairness of the entire process.  But the appellate court asserted that Edwards did not offer a proper basis for vacating the initial arbitration award, which has now been reinstated in favor of Wells Fargo. A Wells Fargo spokesperson said the firm was “pleased that the Georgia Court of Appeals completely validated our position.”

Wells Fargo appealed Edwards’ decision in April, denying any agreement to bar specific arbitrators and claiming the judge’s findings were false and not supported by the record.

In the wake of Edwards’ ruling, FINRA hired a law firm to conduct an independent review of its procedures for selecting arbitrators.

The firm found no evidence of an improper agreement to remove certain arbitrators from arbitration cases, but FINRA also said it would implement the report’s recommendations to provide greater transparency to the arbitrator selection process.

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