Merrill Lynch will 'vigorously' take OpenArc breakaway dispute to FINRA arbitration

After a federal court judge in Georgia denied Merrill Lynch’s temporary restraining order request in a lawsuit against breakaway RIA team OpenArc Corporate Advisory, the wirehouse remains committed to pursuing further legal action regarding OpenArc’s departure. 

“The injunction hearing is only​ the first step in the litigation process. We look forward to vigorously pursuing this matter in arbitration and are confident that a FINRA panel will agree that the defendants engaged in a corporate raid and conspired to poach our employees and clients,” Merrill Lynch said in a statement to InvestmentNews.

Merrill’s lawsuit was against OpenArc as well as its new custodian Charles Schwab and investment bank Dynasty Financial Partners. Merrill accused the defendants of conspiring to run a “premeditated corporate raid” of the Atlanta-based OpenArc team, which managed $129 billion in assets at Merrill Lynch. In a Tuesday ruling, Judge Victoria Calvert in the U.S. District Court in the Northern District of Georgia denied Merrill’s request for injunctive relief and a restraining order.

“[Tuesday's] court decision is a watershed moment for the wealth management industry. It acknowledges the strength and sophistication of the independent movement,” Dynasty CEO Shirl Penney said in a statement. “The judge found no evidence to show that the protocol for broker recruitment was not followed. The Court also noted that OpenArc, Dynasty and Schwab acted in good faith.”

Penney has joined the board of directors at OpenArc, which took minority investment from Dynasty Financial Partners amid its wirehouse breakaway to go independent. “We will always stand for and advocate for client and advisor choice which is at the core of what the independent movement is all about,” Penney said. 

A spokesperson for Charles Schwab also shared the below statement following Tuesday’s court ruling.

“As we said in our filing, the allegations against Schwab were not facts but rather unfounded speculation. We are pleased that the Court agreed. We hold ourselves to the highest standards of integrity and our business practices are rooted in respect for individual choice and fair competition. And our unwavering commitment to our clients is our guiding priority.”