Wells Fargo 'Manipulated' FINRA Arbitration Process: Judge

A FINRA spokesperson said Wednesday that “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.”

Added the spokesperson: “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.”

A spokesperson for Wells Fargo Advisors added in another statement that it intends to appeal the decision.

“We adamantly deny all of the allegations cited in this 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 both parties had the opportunity to make arguments regarding each of these issues to the arbitrators and to FINRA.”

The FINRA Neutral List Selection System computerized process was implemented in 1998; PIABA stated that the process exists in its “current form because of concerns [about] how FINRA previously managed its arbitrator appointment process dating back to the 1990s.”

Before October 1998, FINRA staff controlled the arbitrator appointment process, PIABA said.

“Based on this judge’s order, it looks like somebody has gotten [FINRA] staff back involved in appointing arbitrators where, starting in late 1998, FINRA had moved all of this to being an electronic system,” Michael Edmiston, the new PIABA president and partner with Jonathan W. Evans & Associates in Studio City, California, told ThinkAdvisor Wednesday in a phone interview.

Added Edmiston: “FINRA has worked very hard to turn itself into the last source of securities arbitration … Up until this order came out, my opinion was they were doing a very good job. To see this judge’s ruling is just shocking.”

Joseph Peiffer, managing partner of Peiffer Wolf Carr Kane Conway & Wise and former PIABA president, added in a separate response to the vacated arbitration ruling: “FINRA Dispute Director, Rick Berry, needs to come down to Capitol Hill, raise his right hand and explain to the American investing public just how deep the corruption goes at his industry-run forum. Congress and investors need to know: ‘How many other arbitration panels have been tainted?’”

(Photo: Bloomberg)