Finra panel rules against $900M team terminated by Merrill

In what looks like the end of a long-simmering dispute, Finra orders two members of a team terminated by Merrill Lynch to pay the brokerage $3.5 million
SEP 29, 2009
A long-running dispute between Merrill Lynch and a prominent team of advisers in Hawaii is over. Last Friday, an arbitration panel ordered two of the advisers to pay back part of the balances they owed on their promissory notes. The advisers, Carl Choy and Lynne Kinney, were ordered to pay Merrill Lynch net amounts of $2.6 million and $931,000, respectively. Merrill was ordered to pay a third member of the team, Ronald "Buzz" Wo, a total of $505,000 for unjust enrichment, attorney's fees and for an indemnity claim he made against Merrill. The firm sued the advisers after it terminated them in September 2009 — less than a year after recruiting the team from Morgan Stanley & Co. Inc. The team, led by Mr. Choy, managed about $900 million at the time. "I don't think we've ever gotten clarity as to exactly what [the reason for termination] was," Mr. Choy told InvestmentNews. "We were there [at Merrill] for about 11 months, and transitioned about 90% of what [accounts] we wanted," Mr. Choy said. "Then they terminated us." As for why, "that's between [Bank of America] and Merrill. We don't know who was in control at the time," he said. Mr. Choy said part of the reason for the team's termination appeared to be an alleged violation of the recruitment protocol when the team moved from Morgan Stanley. The arbitration award said Mr. Wo was terminated for violating the firm's policies in connection with his transition from a competitor. The arbitration panel directed that Mr. Wo's U-5 termination form be changed to say "terminated without cause." The arbitrators denied requests by Mr. Choy and Ms. Kinney to amend their U-5s. Mr. Choy's and Ms. Kinney's regulatory records do not show any termination information. "We are very pleased that the panel rejected most of the claims and ordered Mr. Choy and Ms. Kinney to pay a total of more than $3 million to the firm," Merrill spokesman Bill Halldin said in a statement. Before reducing the amounts owed, Mr. Choy had a total balance due of $3 million on his promissory note, and Ms. Kinney owed $1.6 million, according to the award. Mr. Choy's debt was reduced by $520,000, and Ms. Kinney's by $570,000, for "unjust enrichment" by Merrill, according to the award. Merrill was also liable for another $193,000 on Mr. Choy's indemnity counterclaim, and $107,000 on a similar charge from Ms. Kinney, stemming from a separate dispute with Morgan Stanley. The team formed their own firm, CKW Financial Group LLC, in November 2009. CKW has assets under management of just over $800 million, Mr. Choy said. The firm has five employees in addition to the three partners, he said, and will soon be adding another employee and taking more office space. CKW focuses on investment management consulting. "We're managers of managers," Mr. Choy said. During the litigation, the team couldn't say much to clients about what was happening, Mr. Choy said. "But they followed us. The relationships with clients really matters."

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