Charles Schwab & Co. Inc. is continuing to fight back against former brokers who leave its ranks.
In one of its most recent actions, the firm filed suit last month against a Tampa, Fla.-based registered investment adviser, Camelot Wealth Management. Schwab accused the RIA, which was founded earlier this year by former Schwab branch manager Brian Mahoney, of engaging in a “civil conspiracy” when it hired two other former Schwab brokers, according to a complaint filed last month in the U.S. District Court for the Middle District of Florida.
Specifically, Schwab said that Camelot had obtained and misused information on Schwab clients when it hired the two brokers, Ivan Sanabria and Gary Husel, both of whom formerly reported to Mr. Mahoney, according to the complaint.
Mr. Sanabria and Mr. Husel, who operated under the title of financial consultants, served clients with some $750 million in assets and brought in “hundreds of thousands” in profits for Schwab, according to the complaint. Schwab has not specified damages. It has also filed an arbitration claim with the
Financial Industry Regulatory Authority Inc. against the two brokers.
The complaint against Camelot follows a string of similar cases, many of which, however, have been unsuccessful. In August, an arbitration panel
denied a $15 million claim by Schwab against Morgan Stanley. A few weeks later, a panel
denied another $1 million claim against a former Schwab adviser and Morgan Stanley.
Other cases remain pending, including one in the Superior Court of the State of California for the County of Los Angeles against a Schwab adviser who went to an independent firm. Another was filed on Oct. 31 in U.S. District Court in New Mexico against a former financial consultant who had removed confidential client information, Schwab said.
“We are not dismissing this action and we continue to pursue it aggressively as with any other similar cases,” said Schwab spokesman, Greg Gable.
Schwab said that it had reason to believe that Mr. Sanabria had removed confidential client information because he had accessed over 100 client accounts late at night “in rapid succession.” It also said that Mr. Sanabria and Camelot had violated their employment contracts by sending a post card to at least one former Schwab client advertising that Mr. Sanabria had joined the firm. Mr. Husel also called a former client, also in violation of their contracts, Schwab alleged.
Attorneys and industry observers said Schwab may be more aggressive in pursuing these claims because it is not a member of the Protocol for Broker Recruiting, which is an agreement between over 1,000 firms allowing them to take certain client information without fear of being sued by their former firm.
The two advisers in this case could not be reached for comment. Both terminated their registration with Camelot in late October, shortly after the suit was filed, according to registration records with the Securities and Exchange Commission.
Mr. Mahoney declined to comment.
