DEI Category Archives — New York Securities Fraud Lawyers Blog Published by New York Securities Attorneys

On Wednesday, September 4, 2024, Malecki Law had their first all-around all-female Initial Pre-Hearing Conference (IPHC). An IPHC is a conference that takes place after arbitrators have been selected and provides a first impression for everyone involved. The participants of the IPHC included a panel of three female arbitrators, two female attorneys representing their female client, a female opposing counsel representing the Respondent firm, a female legal extern of the Claimant’s law office, and a female FINRA staff member who coordinated the call. This IPHC makeup of all women was a first for Malecki Law. This begs some questions – how far has the securities arbitration and litigation field come in fostering a more diverse and inclusive environment, and what steps are being taken to continue to facilitate this growth?

Early traces of Diversity, Equity, and Inclusion (DEI) can be tracked down to the mid-1960s when societal movements and legal transformations began to mold the corporate world. The early 2000s saw DEI becoming a business imperative, as it was not only ethical to recognize its importance but also aided in business success. McKinsey & Company, a multinational strategy and management consulting firm, revealed in its report that companies with higher levels of diversity are more likely to have financial returns above their industry medians. FINRA also stresses the importance of DEI to provide a fair and efficient environment for investors, brokerage firms, and registered representatives. FINRA has stated that it is committed to continuing efforts to cultivate diversity, inclusion, and equal opportunity within the industry. Although there exists the need and recognition for diversity within securities arbitration and litigation , has this recognition translated into concrete results?

Currently, FINRA has facilitated efforts to recruit new arbitrators, particularly those from diverse backgrounds to magnify arbitrator diversity. Methods employed by FINRA to achieve its goal include outreach to one hundred minority and women’s organizations, attending conferences where individuals of varied backgrounds attend, and hosting events with diversity-based organizations. According to FINRA’s 2023 Demographic Survey, women make up 45% of joined arbitrators, yet the overall roster of arbitrators consists of 35% women. This portrays a minor increase compared to the overall roster in the 2022 Demographic Survey, which saw 33% of female arbitrators. Further, as of 2023, men made up 53% of arbitrators who have joined and increased to 63% of arbitrators on the overall roster. Moreover, in terms of diversity amongst mediators, according to FINRA’s 2023 Demographic Survey, women made up 33% of the entire mediator roster, only a 4% increase from the previous year. So far, diversity amongst genders in the industry is only inching its way up.

In the years following George Floyd’s death, many companies have introduced internal efforts to increase their diversity, equity, and inclusion (“DEI”) initiatives to protect those who have historically been disadvantaged. However, it is important that these companies are honest about their efforts, but in at least one case, it has been alleged a brokerage firm was repeatedly not honest.

Wells Fargo is at the center of Environmental, Social, and Governance (“ESG”) related lawsuits deriving from allegedly conducting fake job interviews to diverse applicants, in efforts to comply with their “Diverse Slating Policy.” On their second attempt at suing Wells Fargo, shareholders commenced a lawsuit alleging that both Wells Fargo and members of their board misrepresented the firm’s DEI initiatives and deprived job opportunities from members of underrepresented groups, groups the initiatives were meant to help. As the “S” in “ESG” stands for “social,” the topic of DEI falls underneath that umbrella. Many companies that establish policies to “enhance” diversity in the workplace fail to implement and/or report such practices, resulting in substantial scrutiny from both investors and the SEC.

“Well-intentioned people created these initiatives, but when they hit the ground, the energy was devoted not to implementing them but finding a way to get around them,” according to Linda Friedman, a lawyer who settled a class-action suit on behalf of 320 black financial advisors for $36 million in 2017 after the advisors sued the company for allegedly positioning them to work in poor neighborhoods while seemingly affording white financial advisors to newer clients and better opportunities. Following this lawsuit, along with the overwhelming impact of George Floyd’s death in 2020, many companies, including Wells Fargo, issued a “diverse slate” policy, otherwise known as a diverse search requirement. Specifically, Wells Fargo’s policy allegedly asserted that at least 50% of the prospective job candidates who are interviewed must represent a disadvantaged group or some kind of diversity component (including race/ethnicity, gender, LGBTQ, veterans, and people with disabilities) for most posted positions in the U.S. with compensation greater than $100,000 per year. See Complaint filed 6/28/22. Although this may seem like a step in the right direction, it is quite the contrary because over the following years, it is alleged that the policy caused confusion throughout the firm and resulted in negatively impacting the people these initiatives were intended to help.

Articles Posted in DEI

Malecki Law Had First Female-Led IPHC – Is Diversity in the FINRA Space on the Rise?

What if a Big Firm Misrepresents Its DEI Initiatives?