Warren, Porter Seek Answers on Troubling New Allegations of Wells Fargo’s Atrocious Behavior and FINRA’s Ability to Effectively Police the Financial System
FEB 10, 2022 | REPUBLISHED BY LIT: MAR 10, 2022
Washington, D.C. – United States Senator Elizabeth Warren (D-Mass), a member of the Senate Banking, Housing, and Urban Affairs Committee and the Senate Finance Committee, and Congresswoman Katie Porter (D-Calif.) sent a letter to the Financial Industry Regulatory Authority (FINRA) questioning new reports of misbehavior by Wells Fargo that raise concerns about the the self-regulatory organization’s ability to fairly and effectively police the financial system.
The letter comes after allegations that Wells Fargo, with the permission of FINRA, rigged the arbitration process by manipulating a list of arbitrators in a case in which the bank was alleged to have mishandled a customer’s investments.
“These findings by a Federal judge in the Wells Fargo case raise serious questions about your assertions that the FINRA arbitration process is ‘neutral, efficient and fair,’ and about whether Wells Fargo has once again sought to undermine consumer protection rules,” wrote the lawmakers.
For years, FINRA has used a computer system to randomly generate a neutral list of potential arbitrators from which the parties agree on three to decide the case.
But according to the findings of Superior Court Judge Belinda Edwards, in this case, multiple names were removed from the list at the request of Wells Fargo’s lawyer and with FINRA’s permission.
Judge Edwards wrote that
“Permitting one lawyer to secretly red line the neutral list makes the list anything but neutral, and calls into question the entire fairness of the arbitral forum.”
“This latest report brings all three problems into focus: it reveals troubling new allegations about the atrocious behavior of Wells Fargo, the inability of FINRA to effectively police the financial system, and the unfairness of the arbitration process,” the lawmakers wrote.
The lawmakers pressed FINRA for answers about the case, Wells Fargo’s interactions with FINRA, and the FINRA arbitration process.
Senator Warren has a long record of calling out the wide-ranging and long-lasting pattern of illegal and abusive behavior by Wells Fargo.
She has also raised concerns about FINRA’s ability to effectively enforce rules against fraudulent and abusive behavior by brokers and dealers.
And Senator Warren has also fought for years to address the problems for consumers and workers caused by forced arbitration processes that limit their rights.
Who is Judge Belinda Edwards?
“INJUSTICE ANYWHERE IS A THREAT TO JUSTICE EVERYWHERE” – MARTIN LUTHER KING, JR
Belinda E. Edwards is a dedicated public servant who learned early in her career as a finance professional, attorney and judge, that she is most fulfilled while working in direct service to others. It is this same spirit of service driving her to run for re-election for Fulton County Superior Court Judge.
As a native of Atlanta and child of the civil rights movement, I was fortunate to have loving parents committed to sacrificing for their children so they might obtain what they didn’t have, a college education. My grandmother whom I spent a great deal of time with, Mrs. Ruby L. Edwards, stressed many things to me as a child but two were hallmarks: a. always vote, people died so that you could vote; and b. go out and get the best education you can, then come back and try to make a difference in your community.
I took her advice to heart. I always vote. I also got the best education I could: a B.A. in Economics from Stanford University, an MBA in Finance and Accounting from Columbia University Graduate School of Business and a JD from Georgia State College of Law. After completing each milestone in my education, I came back to make a difference in my community.
That is what I have done for the past thirty years and that is what I will continue to do as a Fulton County Superior Court Judge.
My Values
- Family comes first.
- Integrity matters.
- Justice should prevail.
- Service above self.
- Honesty is a given.
- Humility is a gift.
- Accountability is a must.
Community Guidance
As a native of Atlanta and child of the civil rights movement, I was fortunate to have loving parents committed to sacrificing for their children so they might obtain what they didn’t have, a college education.
My grandmother whom I spent a great deal of time with, Mrs. Ruby L. Edwards, stressed many things to me as a child but two were hallmarks: a. always vote, people died so that you could vote; and b. go out and get the best education you can, then come back and try to make a difference in your community.
I took her advice to heart. I always vote. I also got the best education I could: a B.A. in Economics from Stanford University, an MBA in Finance and Accounting from Columbia University Graduate School of Business and a JD from Georgia State College of Law. After completing each milestone in my education, I came back to make a difference in my community.
That is what I have done for the past thirty years and that is what I will continue to do as a Fulton County Superior Court Judge.
Wells Fargo Gamed System in Investor Arbitration, Judge Says
A Georgia judge said the bank and its lawyer secretly manipulated a list of potential arbitrators
FEB 3, 2022 | REPUBLISHED BY LIT: MAR 10, 2022
A Georgia judge questioned the fairness of the financial industry’s dispute-resolution process in a ruling stemming from a Wells Fargo WFC 5.81% & Co. customer’s claim that the bank botched his investments.
Wells Fargo and its lawyer improperly manipulated a list of arbitrators who could decide on the customer’s claim—with the permission of the regulatory body that oversees the process, Superior Court Judge Belinda Edwards wrote in a Jan. 25 ruling.
Brian Leggett and Bryson Holdings LLC brought the case against Wells Fargo after losing some $1.2 million on a merger arbitrage investment strategy executed by a broker there in 2015 and 2016.
The arbitrators ultimately decided in Wells Fargo’s favor.
Judge Edwards’s ruling vacated the arbitration award.
The case is another mess for Wells Fargo, which is still digging out from its long-running fake-accounts scandal. It also sheds an unflattering light on the arbitration process set up to handle many of the disputes between investors and financial institutions. The process is overseen by the Financial Industry Regulatory Authority, Wall Street’s self-regulatory arm, and typically plays out behind closed doors.
Finra for years has used a computer system to randomly generate a neutral list of potential arbitrators from which the parties agree on three to decide the case. But in this case, multiple names were removed from the list at the request of Wells Fargo’s lawyer and with the permission of Finra, according to the judge’s decision.
“Permitting one lawyer to secretly red line the neutral list makes the list anything but neutral, and calls into question the entire fairness of the arbitral forum,” Judge Edwards wrote.
A Finra spokeswoman said that none of the arbitrators in question were excluded or removed from the lists before they were sent to the parties, nor did Finra have any sort of agreement with Wells Fargo’s attorney regarding the appointment of arbitrators. “Any assertions to that effect are false,” she said.
Finra “has well-established rules for admitting arbitrators to its roster and the process is fair to all parties,” a Wells Fargo spokeswoman said. “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.”
Still, the verdict is sure to fuel concerns among critics that private arbitration leaves room for bias. Sen. Elizabeth Warren (D., Mass.) has previously criticized Finra arbitration.
Michael Edmiston, an attorney and president of the Public Investors Advocate Bar Association, said, “It highlights a suspicion that many of us perceive that sometimes the arbitrator names that appear on a list are not as random as we’d like them to be.”
His group has called for the Securities and Exchange Commission to investigate Finra’s operations and Congress to hold hearings.
Jill Gross, a professor at the Elisabeth Haub School of Law at Pace University who has studied arbitration, said that Finra has generally bent over backward to address complaints about unfairness in the process. The Wells Fargo case “struck me as really out of the norm and greatly varying with my experience of the forum,” she said.
The judge said the rationale for vacating the decision also was based on the conduct of the bank and its lawyer after the arbitration began.
At one point, the arbitration stopped due to a medical emergency.
When it resumed, the broker who had been testifying provided different answers than before the break, and the bank’s attorney misrepresented the prior testimony, according to the judge’s decision.
“Wells Fargo and its counsel committed fraud,”
she said.
The Wells Fargo spokeswoman said that the bank plans to appeal the decision.
“We adamantly deny all of the allegations cited in this decision,”
she said.
The attorney that represented Wells Fargo in the case, Terry Weiss, didn’t respond to an email requesting comment.
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