Finra: Morgan Stanley must pay Schwab $1.2 million over broker recruiting violation

Arbitrators rule that Morgan Stanley violated trade secrets by "maliciously and willfully" appropriating a Schwab client list

Nov 3, 2017 @ 5:24 pm

By Mark Schoeff Jr.

A Finra arbitration panel awarded $1.2 million to Charles Schwab & Co. Inc. in a case against Morgan Stanley Smith Barney involving the recruitment of a Schwab broker.

In a Nov. 2 award, the arbitrators found that Morgan Stanley violated the California Uniform Trade Secrets Act by diverting Schwab clients of a broker called "Mr. Q." The broker's customer list, which included contact and financial information, were deemed trade secrets.

"MSSB misappropriated [Schwab's] trade secrets during the recruitment, hiring and employment of Mr. Q., and did so maliciously and willfully," the award states.

Schwab claimed that Morgan Stanley "orchestrated the departure and wrongful actions of Mr. Q, [Schwab's] former employee, by inducing Mr. Q" to take his customer list and clients to Morgan Stanley.

The arbitrators said that Schwab did not sign and was not bound by the protocol for broker recruiting. The case was filed in March 2016. Morgan Stanley announced this week that it is withdrawing from the protocol.

Morgan Stanley did not immediately respond to a request for comment. The firm's penalty breaks down as $360,000 in compensatory damages, $289,524 in attorneys' fees and $600,000 in punitive damages.

"We're pleased with Finra's decision in this matter," said Schwab spokesman Rob Farmer. "We take these issues related to confidentiality, client solicitation and intellectual property very seriously. We intend to pursue breaches when they occur through appropriate legal action."

0
Comments

What do you think?

View comments

Recommended for you

All of the noise in the District of Columbia is distracting your clients. Ben Phillips of Event Shares explains what deserves your attention (and what doesn't) as we head into 2018.

Recommended Video

Channels

Latest news & opinion

Capital Group, sponsor of American Funds, wins 401(k) lawsuit

Decision comes as financial services companies, especially those focused on active management, have been sued for self-dealing.

SEC considers barring aggrieved investors from suing companies

Swept up by pro-business zeitgeist, regulator seeks to reverse two-decade slump in U.S. stock listings.

Wells Fargo, Morgan Stanley use contrary tactics to keep advisers

Wells is helping brokers transition to independence within the firm, while Morgan is taking them to court.

Fidelity pushes Vanguard to compete on brand in 401(k) plans

With Fidelity imposing an additional fee, Vanguard likely will look less attractive compared with comparably priced index-fund providers, advisers said.

Goldman's measure of risk appetite hits record

Global stocks and U.S. Treasuries are seeing their most "extreme" start to a year ever, bank says.

X

Hi! Glad you're here and we hope you like all the great work we do here at arjuna-design. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting arjuna-design.com? It'll help us continue to serve you.

Yes, show me how to whitelist arjuna-design.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Last News

social security maximum wage base college savings plans nj vanguard sp 500 fund pretax 401k limit benefits.ml.com 401k turbotax 2014 state hsa maximum contribution new yorks 529 ira on tax return ssa.gov survivor benefits ny saves college savings plan 529 franklin templeton emerging markets bond fund northwestern mutual financial representative job description putnam growth and income class a morgan stanley institutional international equity fund new york life premier plus variable annuity american century mutual funds daily prices difference between merrill edge and merrill lynch t rowe price personal strategy income t rowe price large cap growth i separate account one cent coin value life insurance policy surrender tsp rollover to roth ira td ameritrade money market purchase is wall street prep worth it fidelity 529 plan performance rbc daily fund prices first edition charizard holographic prepaid college florida prices blackrock build america bond trust