National Retirement Partners Inc. was ordered to pay a $2 million arbitration award to two former financial advisers who were let go by the firm after it bought their practice.
Jeffrey Brain Bafs and Wade Alan Walker left Merrill Lynch & Co. Inc. in 2008 to become affiliated with NRP Financial Inc., NRP Retirement’s broker-dealer, according to the arbitration award. The advisers had 150 to 200 retirement plan clients at their practice prior to the move, according to their attorney, Scott C. Matasar, a partner at Calfee Halter & Griswold LLP.
NRP claimed that advisers breached their transition agreement, and it accused the pair of breach of contract and fiduciary duty, promissory fraud, intentional misrepresentation and intentional interference with contract.
NRP also sought an unspecified amount of money from the advisers to cover damages.
News of the arbitration award was first reported by Dow Jones.
A three-member arbitration panel of the
Financial Industry Regulatory Authority Inc. dismissed NRP’s claims, saying they were “frivolous” and “made in bad faith,” and awarded the two advisers — who had filed a counterclaim — a total of $2 million. Of that, $500,000 will go to Mr. Walker, $1 million to Mr. Bafs, and the remainder will cover legal fees.
The advisers claimed that NRP had falsely presented itself as a firm that follows the brokerage industry’s recruiting protocol, which permits departing advisers to take some client information when they change firms. Currently, NRP is listed among the firms that follow the protocol, according to data from the Securities Industry and Financial Markets Association.
The advisers also said that NRP announced prematurely that they were leaving Merrill Lynch, which led to the wirehouse’s firing the advisers and then barring them from contacting their clients for close to five months, according to the arbitration documents.
The advisers said they were “set up for failure” when NRP made it impossible to bring their clients over and that NRP’s refusal to support the practice due to the broker-dealer’s “financial-liquidity issues” ensured the collapse of the advisers’ practice, according to the arbitration award.
The men are currently not affiliated with a Finra-registered broker-dealer. Mr. Bafs is interested in returning to the industry, and he explained at the arbitration hearing that he couldn’t get back into the business until he cleared his name, Mr. Matasar said.
“He felt he couldn’t get back in, because he didn’t want to explain to his clients that he had this black cloud over his head,” Mr. Matasar said. The panel’s finding that NRP’s claim was “frivolous” is vindication for Mr. Bafs, Mr. Matasar added.
Mr. Walker, on the other hand, will probably not return to the retirement plan industry, Mr. Matasar said. The ex-adviser is the chairman of startup sporting goods manufacturer Legacy Outdoor Holding Inc. and has moved on, he said.
NRP spokeswoman Marie Rufo was not immediately available for comment.
LPL Investment Holdings Inc. this month said that it is acquiring the assets of National Retirement Partners.
