Finra arbitration panel hits Robert W. Baird & Co. with $17.8 million penalty

The asset and wealth management firm was accused of unfair competition and solicitation

Jun 17, 2015 @ 5:20 pm

By Alessandra Malito

A Financial Industry Regulatory Authority Inc. arbitration panel has slapped Robert W. Baird & Co. and 20 of its employees with a fine of $17.8 million plus interest, awarded to Gleacher & Co., a dissolved investment firm, for alleged unfair competition and solicitation, among other claims related to employees who left Gleacher for Baird.

Five of the 20 Baird employees have been ordered to pay at least $50,000 plus interest, and the firm has been ordered to pay $13 million in compensatory damages and nearly $4.6 million in attorney and consulting fees.

The asset and wealth management firm, which also has investment banking and private equity divisions, denied the allegations.

"While we disagree with this finding and are extremely disappointed in the outcome, we are fully reserved for this claim, and it will have no impact on our financial results," said John Rumpf, a Baird spokesperson.

Gleacher did not respond to a request for comment. The company, which dissolved in 2014, is now solely "winding up its business and paying or providing for its obligations," its website said.

In regards to the penalized Baird employees, Mr. Rumpf said that "these associates are important additions to our overall fixed income capital markets platform.

“They've broadened our capabilities for our clients and have significant opportunities going forward," he said.

Unfair competition is something that industry executives argue about all of the time, said Bill Singer, an attorney who specializes in the financial services industry. An age-old problem on Wall Street is the question of who owns the client: Does a client belong to the stockbroker or the company?

Firms will sometimes argue that an employee who leaves is stealing clients. The regulator's decision may vary on a case-by-case basis, though.

"You can take the exact same set of facts and some panels will say the former firm is right and other panels will say the current firm is right," Mr. Singer said. "It's important when you leave a brokerage firm that you do so in a proper manner so you don't get sued."


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