Morgan Stanley last month suffered a $1 million loss in an arbitration case charging that the firm had “blindsided” a small regional broker-dealer, Strand Atkinson Williams & York Inc., “by a swift and crippling raid” of senior management and top-producing brokers.
A three-member
Financial Industry Regulatory Authority Inc. arbitration panel decided that New York-based Morgan Stanley; Bradford Wear, the past president and treasurer of Portland, Ore.-based Strand Atkinson; and three former brokers of that firm were liable to pay for damages in the matter. The case was originally brought in December.
According to the arbitration complaint, which Strand Atkinson filed with Finra of New York and Washington in December after the departure of brokers, Mr. Wear and the five brokers' “service to Morgan Stanley began prior to their departure from Strand Atkinson.”
The complaint added: “While the employees were still working at Strand Atkinson, Morgan Stanley induced them to use their positions as trusted officers and employees to covertly recruit fellow employees, to copy confidential information and to improperly solicit Strand Atkinson customers.”
Morgan Stanley and the former Strand Atkinson employees were liable due to claims of breaching their fiduciary duty and aiding in the breaching of their fiduciary duty, the arbitration decision stated.
Mr. Wear was also ordered to pay $89,000 in damages to his former firm for a breach of contract, and another broker, Norman Fincher, likewise was ordered to pay $152,000.
Experts said that one general indicator when deciding raiding cases in arbitration claims and lawsuits is if a rival is found to have lifted at least 25% to 30% of gross revenue from another firm or branch.
Industry attorneys and expert witnesses also said that raiding cases often center on the role of branch managers or executives who owe a fiduciary duty to their employer.
A Morgan Stanley spokeswoman, Christine Pollack, said the firm declined to comment about the matter.
