Editor's Note: This ran as a breaking news article on June 29, 2022.

The law firm hired to look into possible improprieties in the selection of Financial Industry Regulatory Authority arbitrators in a 2019 case involving Wells Fargo says it found no evidence of collusion.

In January, Judge Belinda Edwards of the Superior Court of Fulton County of the State of Georgia vacated a 2019 arbitration award in Wells Fargo’s favor, ruling that the company and its counsel “manipulated the Finra arbitrator selection process.” The arbitration case was filed by Brian Leggett, who accused Wells Fargo and an advisor at the wirehouse of negligence, failure to supervise, churning and breach of fiduciary duty, among other claims. Leggett claimed to have incurred more than $1.1 million in losses as a result of the actions of the Wells Fargo advisor.

The Wells Fargo counsel, Terry Weiss, had said that Finra provided him with a “subset” of arbitrators in which several were removed from the list given to the claimants.

A Finra spokesperson told FA-IQ at the time that there was no agreement between the self-regulator’s Dispute Resolution Services and Weiss on the appointment of arbitrators.

In February, Finra announced that it hired law firm Lowenstein Sandler to investigate whether Finra’s arbitration forum complied with its own rules and policies on arbitrator selection in the Wells Fargo case and make the findings public.

Finra released today the report from the law firm, which found no instances of collusion in the case.

“After careful consideration of the evidence obtained during the investigation, Lowenstein does not believe that there was any agreement between Weiss and Finra regarding the panels for Weiss’s cases. All current and former FINRA personnel who could conceivably have been a part of such an agreement were interviewed and denied the agreement’s existence, noting that it would be contrary to DRS’s culture of neutrality. Lowenstein found them all to be credible,” the law firm said in its report. “Likewise, no documentary evidence — including any emails or other material — suggested in any way that such an agreement existed.”

Nonetheless, the law firm also recommended that Finra take certain steps to improve transparency about the arbitrator selection process, including updating the DRS manual, implementing mandatory training for DRS personnel, making any changes to the manual publicly available, providing written explanations for denying or approving “causal challenges” and more.

Lowenstein conducted 29 interviews; examined more than 150,000 documents, emails, and telephone records; reviewed the Finra DRS arbitrator database system; and listened to recordings of relevant arbitration proceedings. The report also stated that Finra personnel cooperated fully, and that neither Finra management nor the audit committee dictated the methods of the inquiry or its conclusions.

Finra said in a statement that its audit committee accepted the report’s findings and that it “recognized that there are nonetheless opportunities to improve the policies, procedures and training related to the arbitrator selection process, as the firm recommended.”

The Wells Fargo case has also attracted attention from Sen. Elizabeth Warren, D-Mass., and Rep. Katie Porter, D-Calif., who in February requested information from Finra about the arbitrator selection in the claim.

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