Sen. Elizabeth Warren, D-Mass., & Rep. Katie Porter, D-Calif., is pressing FINRA CEO Robert Cook to answer questions by March 22 over the regulator's independent investigation of a Georgia judge's ruling that Wells Fargo and its attorneys are "arbitrators of the Financial Industry Regulatory Authority". The selection process has been rigged.
In a March 7 letter to Cook, Warren and Porter stated that they were disappointed by Cook's February 21 letter regarding FINRA's arbitration selection process, as he was "disappointed with the selection of arbitrators at Wells Fargo". Leggett case, the actions of Wells Fargo and its representatives, and communications between Wells Fargo officials and FINRA officials regarding the arbitration process.
Instead, the lawmakers said, "You have only provided us with an informal description of the process from FINRA's Dispute Resolution Services (DRS)."
Cook's letter did "nothing to address the concerns raised by a federal judge and press reporting about FINRA's handling of this matter," he said.
Wells Fargo said on February 25 that it is appealing Atlanta Superior Court Judge Belinda Edwards' January 25 decision that it manipulated FINRA's arbitration process.
FINRA said on February 18 that it was ordering an independent review of the arbitration decision in favor of Wells Fargo that Edwards had ousted.
FINRA has hired the Lowenstein Sandler Law Firm to review how FINRA Dispute Resolution Services adhered to its rules, policies and procedures for arbitrator selection in proceedings, including a panel that filed a lawsuit against Wells Fargo as an investor. denied the claim.
Warren and Porter said they "welcome this investigation and these reforms - but the fact that you have taken these steps raises new concerns about the extent of wrongdoing in the arbitration process in the Wells Fargo v. Leggett case." To address these concerns, we reiterate our request for you to provide complete and complete answers to the questions raised in our letter dated February 9, 2022.
In their Tuesday letter, Warren and Porter asked Cook whether the review would include any cases other than Wells Fargo v. Leggett.
He also asked Cook, "Will FINRA consider conducting new procedures in these cases based on the findings of the independent investigation?"
The lawmakers note that FINRA's response also explained that FINRA is "implementing increased monitoring of its decisions in response to challenges by parties seeking to remove arbitrators."
Cook explained in his letter to Warren and Porter on February 21 that during the investigation, a new "enhanced oversight" internal process would be used to review and reexamine decisions to remove arbitrators at the request of one party. .
Michael Adamiston, President of the Public Advocate Arbitration Bar, "It takes the final decision-making process of removing any arbitrator at the request of the party from FINRA employees and places it in the hands of the Director alone and re-examined by FINRA's Chief Legal Officer." She goes." The association told ThinkAdvisor in an email.
"The increased oversight is designed to deter any party-attorney from trying to tilt the table at the local office level by reconstituting an arbitration panel," Adamiston said.
“If the decisions on the director’s removal were made public, the additional transparency would provide continued guidance to the parties and counsel to understand under what circumstances the arbitrator could be successfully removed,” he continued.
'Unwritten agreement'
Edwards' order focuses on a 2017 FINRA dispute filed by Wells Fargo Advisors client Brian Leggett over $1.1 million in damages he said was at the hands of a Wells Fargo broker. In 2019, an arbitration panel denied Leggett's claim.
In 2021, Leggett asked a Georgia court to vacate the Wells Fargo award, while Wells Fargo asked the court to confirm it.
On June 25, Edwards vacated the FINRA arbitration decision, finding that Wells Fargo and its attorneys manipulated the arbitration process. According to Edwards, the manipulation was accomplished with the help of FINRA dispute resolution.
Edwards ruled that Wells Fargo denied investors their contractual right to a neutral, computer-generated list of potential arbitrators, saying its attorney had "unwritten" with FINRA to exclude certain arbitrators from consideration. Compromised".