There are no secret deals or “improper agreements” to remove possibly prejudiced arbitrators from Financial Industry Regulatory Authority arbitration panels, according to a new report from a law firm hired by the regulator.

Counsel Lowenstein Sandler LLP produced the report in the wake of mounting criticism from investor advocates and members of Congress, who have claimed that the securities industry regulatory organization had allowed Wells Fargo to game the arbitration system in its favor.

The criticism was prompted by a Georgia state judge's ruling in January that concluded Wells Fargo had unfairly tilted the arbitrator selection process in its favor in a case in which an investor accused the bank and one of its advisors of misconduct.

Judge Belinda E. Edwards overturned Wells Fargo’s victory in that case, ruling that the  bank and its lawyer had “a secret agreement” with Finra to automatically remove certain  arbitrators from hearing any of Legget’s cases. Wells Fargo is appealing the decision.

In response to mounting criticism, Finra said it hired Lowenstein Sandler, LLP in February to conduct an independent review of the Wells Fargo case.

“After careful consideration of the evidence obtained during that review, Lowenstein does not believe that there was any agreement between [Wells Fargo counsel Terry] Weiss and FINRA regarding the panels for Weiss’s cases,” the firm said in its report.

The report added, “The evidence further demonstrated that FINRA personnel generally adhered to the policies and procedures and that their actions during the [relevant arbitration] were intended to be fair and reasonable at each step.”

Lowenstein said it conducted 29 interviews; examined more than 150,000 documents, emails, and telephone records; reviewed Finra's Dispute Resolution Services (DRS) arbitrator database system; and listened to recordings of relevant arbitration proceedings.

The investigation was led by Christopher Gerold, a partner in Lowenstein’s Securities Litigation and Corporate Investigations & Integrity Practice Groups. Gerold was chief of the New Jersey Bureau of Securities and served as president of the North American Securities Administrators Association prior to joining Lowenstein in January.

Michael Edmiston, President of the Public Investors Advocacy Bar Association, said Piaba “respects the thorough and rigorous work supporting FINRA’s independent review” but “remains concerned about the lack of transparency in the process and the appearance of impropriety in that case. The appointment of arbitrators is the single most important part of the arbitration process and investors who are forced into arbitration must have confidence in the integrity of the selection process,” Edmiston said.

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