Edwards ruled that "Wells Fargo and its counsel manipulated the Finra arbitrator selection process in violation of the Finra Code of Arbitration Procedure, denying the investors their contractual right to a neutral, computer-generated list of potential arbitrators."
Added Edwards, "Permitting one lawyer to secretly redline the neutral [arbitrator] list makes the list anything but neutral, and calls into question the entire fairness of the arbitral forum."
Finra denied the court’s findings. “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,” Finra spokeswoman Michelle Ong said when Edwards ruled on the case at the end of January.
“As the neutral administrator, we continually strive to make the Finra forum the fairest, most efficient program available and stand behind the integrity of our neutral list selection process,” Ong added.
Wells Fargo said it intends to appeal the decision. “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 we intend to appeal this decision,” spokeswoman Jackie Knolhoff told Financial Advisor.
Michael Edmiston, president of the Public Investors Advocate Bar Association (PIABA), said the attorneys trade group was calling on Congress and the Securities and Exchange Commission to investigate the findings in the court decision.
“The problem here is you don’t know the scope of how badly the system is stacked against investors,” said Edmiston, who is a former senior staff attorney at Finra. “You don’t know what other secret agreements firms have with Finra. It is just this one attorney or multiple attorneys with numerous firms who have created this secret process. You literally just do not know.”