Merrill Lynch claims Dynasty Financial Partners has “reneged on its agreement to arbitrate” in front of FINRA jurisdiction as the wirehouse continues to fight the loss of its $129 billion breakaway team OpenArc Corporate Advisory.
Merrill’s latest motion, filed Feb. 12 in federal District Court for the Northern District of Georgia, comes after a federal judge denied Merrill’s request in September that sought a temporary restraining order against OpenArc’s breakaway. Merrill alleged that investor Dynasty Financial and custodian Charles Schwab supported a “premeditated corporate raid” to lure Atlanta-based OpenArc out of the wirehouse.
“The lack of candor, with Merrill and with this Court, is shocking,” Merrill wrote in its Feb. 12 motion over Dynasty's alleged reneging to arbitrate.
At the center of the latest skirmish is a court‑ordered stay of the federal case—a pause that was put in place while related claims proceed in FINRA arbitration. Merrill is now asking the judge to unwind that pause.
“Dynasty quietly took a position, incompatible with the record, that it never consented to FINRA arbitration and would not submit to FINRA’s jurisdiction,” Merrill alleged in its Feb. 12 filing.
"Dynasty knew exactly what it was doing. It stayed silent because if it informed the Court that it did not consent to arbitrate, it could affect not only the Court’s decision on Merrill’s motions for a TRO and expedited discovery but also the Court’s decision whether to stay the proceedings as to all parties - and that is exactly what happened.”
Meanwhile as Merrill Lynch continues fighting OpenArc’s breakway, the wirehouse has been hit with the loss of another large advisor team. The KKR-owned independent broker-dealer Janney Montgomery Scott announced that Warren-Fantano Wealth Management has joined the firm’s Delaware office after formerly managing over $1 billion under Merrill Lynch.
Corey Kupfer, a New York–based attorney whose law firm regularly structures wirehouse breakaways, says the fight over the stay is really about where and how Merrill can pursue Dynasty and what discovery it can get regarding information on OpenArc’s exit.
On the one hand, Merrill is arguing that Dynasty effectively submitted to FINRA jurisdiction. On the other, Merrill says that if the court now accepts Dynasty’s position that it never consented to FINRA, then the federal court should lift the stay so Merrill can go after Dynasty in a full-blown court case.
“If the judge lifted the stay and [Merrill] were able to pursue discovery from Dynasty that may give them information that they may not be able to get in a more limited discovery in the FINRA proceeding. That could actually help them,” said Kupfer.
Kupfer says OpenArc’s breakaway “opened the flood gates” as means for inspiring other large advisor teams looking to leave wirehouses. Litigation like Merrill’s is as much about sending a message as it is about winning in court.
“It would be shocking if wirehouses weren't trying to create as much friction as possible to make it seem like it's not easy,” said Kupfer. “Even my $10 billion teams, I tell them, no matter how clean we do stuff, you have a risk of getting sued just for that reason—to not set a precedent, make it seem like it's not going to be easy to get out.”
Regarding Merrill’s most recent motion to lift the stay in its federal case or order Dynasty to arbitration, a spokesperson for the firm said: “Dynasty strenuously disagrees with Merrill’s continuing mischaracterizations at every point in this matter and we are preparing our response to this most recent attack.”
Elsewhere, a Commonwealth team in Massachusetts converts to Cetera, while Janney draws four former Wells Fargo advisors to its Radnor, Pennsylvania office.
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