A judge’s finding that Financial Industry Regulatory Authority (Finra) routinely gave outside counsel for Wells Fargo a selective subset of arbitrators to choose from has sparked a Congressional inquiry.
Senate Banking Committee Member Elizabeth Warren (D-Mass.) and Rep. Katie Porter, (D-Calif.) have asked Finra to provide details on its arbitration process after a judge found that Wells Fargo and its outside attorney, Terry Weiss, had a secret arrangement with Finra to keep certain people off the list of arbitrators in all of his cases, according to documents he turned over to the arbitration panel and the claimants’ attorney.
Now, Warren and Porter want details on the communications regarding any favoritism Finra might have shown to Wells Fargo’s lawyer and whether the company requested arbitrators to be removed from the case, the Wall Street Journal reported, citing a letter Warren and Foley sent to Finra’s top executives last week.
“We have long had concerns about Finra’s ability to effectively enforce rules against fraudulent and abusive behavior by brokers and dealers,” they said in a Wednesday letter to Finra president and chief executive officer Robert Cook, according to the Journal.
The lawmakers also wrote that the case presents “troubling new allegations about the atrocious behavior of Wells Fargo,” the newspaper said.
Finra and Wells Fargo have both denied the allegations of a secret agreement.
At the heart of lawmakers’ concern is a ruling from Judge Belinda Edwards of the Superior Court of Fulton County in Georgia, which concluded that “Wells Fargo and its counsel manipulated the Finra arbitrator selection process.”
As a result, Edwards granted a motion to vacate a 2019 arbitration award in Wells Fargo’s favor against two investors seeking to be made whole from losses totaling $1,178,446 in a merger arbitrage investment.
Edwards also found that both Wells Fargo Advisors LLC and Wells Fargo Clearing Services LLC and their outside counsel committed fraud and perjury.
According to court documents, Weiss admitted that Finra, a private entity that acts as a self regulatory organization for the securities industry, provided him with a “subset” of arbitrators in which at least three were removed from the list provided to the claimants.