A Finra arbitration panel awarded more than $23 million to
Wells Fargo Advisors in case involving what the firm called a “raid” on a regional office by R.W.
Baird & Co.
The
Financial Industry Regulatory Authority Inc. arbitrators ruled that
Baird must pay
Wells Fargo $10.9 million in compensatory damages, $10.9 million in punitive damages, as well as $1.8 million in costs for a total of $23.5 million.
In addition, the Finra arbitrators held that individual members of
Baird's Wichita office must pay
Wells Fargo compensatory damages, including Donald Barry ($542,632), Brian Docking ($161,314), Jill Docking ($181,112) and Kevin McWhorter ($114,942).
The
award, signed last Friday, states that Wells' cause of action “related to [Wells Fargo's] allegation that [Robert W. Baird] raided its branch office in Wichita, Kan.” The arbitrators did not explain the reasoning for their decision.
Baird denied the allegations and filed a counterclaim against Wells Fargo asserting “breach of contract and unfair competition” as well as breach of Finra's “Protocol for Broker Recruiting” and “attempting to stifle competition.”
Raiding cases are routine, but the size of the award surprised Andrew Stoltmann, a Chicago securities attorney.
“An eight-figure punitive damage award against a collectible firm is extraordinarily rare, and I've never seen a bigger one in a raiding case,” Mr. Stoltmann said. “It's reasonable to assume that Baird and the individuals associated with it engaged in some likely egregious activity to get a Finra panel to whack them that hard.”
Baird disputed that it unfairly took advisers away from Wells Fargo.
“We strongly disagree with what is asserted in this situation and with the findings and are extremely disappointed in the size of the award,” said John Rumpf, a Baird spokesman. “In terms of potential impact on our financial results, we will have record revenues for 2016 year end and expect operating income in 2016 to be in line with 2015, which was a record year.”
Wells Fargo declined to comment.
In a June 15, 2015, announcement,
Baird said that it established its Wichita office by adding 10 wealth management professionals, including six financial advisers “who were most recently with Wells Fargo Advisors” and brought $1.1 billion in assets with them.
Usually, raiding cases are settled before an arbitration panel rules, according to Mr. Stoltmann.
But Wells Fargo versus Baird was a knock-down, drag-out affair that encompassed 18 sessions between Dec. 12 and Jan. 6. The original claim was filed on Oct. 9, 2015.
Brokerages competing for adviser teams should take note of this case, according to Mr. Stoltmann.
“It's a shot across the bow to brokerage firms to remind them to be careful when you're taking a large number of brokers from one firm to their firm,” he said.
