Finra arbitrators ordered Morgan Stanley to pay Charles Schwab & Co. Inc. $7.3 million in a dispute over the recruiting of a New Jersey and a Florida financial advisor. In a decision on a related claim, Morgan Stanley must pay the brokers $4.7 million.
Schwab filed an arbitration claim in April 2019 against Morgan Stanley and two former Schwab brokers, Christopher Robert Armstrong and Randall Brian Kiefner, shortly after the pair left Schwab offices in Red Bank, New Jersey, and Orlando, Florida, respectively. Schwab accused them of violating an agreement not to solicit their Schwab clients.
In its statement of claim, Schwab accused Morgan Stanley and the brokers of breach of contract, misappropriation of trade secrets and tortious interference with contracts and with prospective business relations. Schwab demanded that Morgan Stanley and the brokers cease contact with Schwab clients and not use any information pertaining to them.
A three-person Financial Industry Regulatory Authority Inc. arbitration panel found Morgan Stanley and the brokers jointly liable for $3,026,485 in compensatory damages, $104,833 in costs and $1,136,459 in attorneys' fees, according to Monday's award document. Morgan Stanley on its own was found liable for $3,026,485 in punitive damages.
Schwab applauded the outcome.
“We expect our representatives and firms in the industry to follow their legal obligations to protect customer information,” Schwab spokesperson Peter Greenley said in an email statement. “It became necessary in this case to enforce these obligations. The panel's award — which included significant punitive damages — is a reflection of why we take such conduct so seriously.”
Morgan Stanley indicated it might challenge the arbitrators’ ruling.
“We are deeply disappointed with the panel’s decision and are currently considering our options,” Morgan Stanley spokesperson Christine Jockle said in an email statement.
The brokers’ attorney, Clinton W. Marrs of Marrs Griebel Law, did not respond to two requests for comment.
In a cross-claim by the brokers against Morgan Stanley, the Finra arbitrators found the brokerage liable for $2,850,900 in compensatory damages to Armstrong and $1,173,900 in compensatory damages to Kiefner. The arbitrators also ordered Morgan Stanley to pay the brokers $672,399 in attorneys' fees and $35,371 in costs.
The dispute occurred when Morgan Stanley recruited the pair in 2019. Each of them was only with the brokerage for about a month before they were fired for allegedly violating Morgan Stanley conduct rules, according to published reports.
The Finra arbitrators granted Armstrong and Kiefner expungement of the explanations for their departures from Morgan Stanley in their Form U5. Armstrong is now an advisor with Cetera Advisors in Eatontown, New Jersey, and Kiefner is no longer registered, according to BrokerCheck.
The arbitrators denied Morgan Stanley’s cross-claim against the brokers.
Nine-month electronic trading freeze and share lending program at the center of dismissed claim.
Meanwhile, Rossby Financial's leadership buildout rolls on with a new COO appointment as Balefire Wealth welcomes a distinguished retirement specialist to its national network.
With a smaller group of companies driving stock market performance, advisors must work more intentionally to manage concentration risks within client portfolios.
Professional athletes are often targets of scam artists and are particularly vulnerable to fraud.
The brokerage giant tells Wall Street it will use artificial intelligence to reach clients it has never been able to serve — and turn the technology's perceived threat into a competitive edge.
As technical expertise becomes increasingly commoditized, advisors who can integrate strategy, relationships, and specialized expertise into a cohesive client experience will define the next era of wealth management
Growth may get the headlines, but in my experience, longevity is earned through structure, culture, and discipline
