EXCLUSIVE: Credit Suisse Brings Raiding Suit Against UBS
Credit Suisse AG has filed an arbitration claim against UBS AG, challenging its aggressive hiring of high-producing brokers from Credit Suisse’s soon-to-be-dissolved U.S. brokerage division.
The claim, filed with the Financial Industry Regulatory Authority, alleges that UBS Financial Services has conducted an “improper raid” on the firm’s U.S. private banking business since September 1. As previously reported, once Credit Suisse bosses in Zurich made it known they were closing the U.S. brokerage operation they negotiated a deal to give Wells Fargo Advisors access to the approximately 170 CS Private banking brokers for recruiting purposes.
Credit Suisse has filed its arbitration claim with the Financial Industry Regulatory Authority, according to a notice that UBS’s legal department sent to some of the brokers it hired from Credit Suisse. The notice, which we reviewed on Friday, says individual brokers at this point are not named in the action.
However, Credit Suisse claims that its Swiss rival “encouraged Credit Suisse employees to violate their duties to CS by soliciting other CS employees to move to [UBS] and by providing confidential information to [UBS],” according to the notice.
To substantiate a raiding claim, a company making the charge generally must show that a competitor hired away around a third of its production, according to lawyers and recruiters we contacted. The approximately 125 brokers who have jumped to UBS since September generated more than half of Credit Suisse America’s private banking unit last year, said a source who has reviewed UBS’s communications with advisors.
It’s unclear what damages Credit Suisse is seeking, or if they will ask for an injunction against further recruiting, as is typical in raiding cases.
A spokeswoman for Credit Suisse declined to comment or even confirm the arbitration action. A UBS spokesman did not respond to a request for comment.
The exclusive recruiting agreement Credit Suisse arranged in October with Wells Fargo gave Wells the right to recruit the private bankers until early 2016, when the unit is to be officially dissolved. Neither CS nor Wells disclosed terms of the agreement.
Wells Fargo’s top Wealth Management officials have said, however, that they are happy with their measured success.
Wells Fargo does not appear at this time to be a party to the arbitration claim. That may be because its recruiting agreement with Credit Suisse likely ties remuneration owed to the actual number of brokers it is able to recruit, said Marc S. Dobin, a securities attorney in Jupiter, Fla.
“Maybe Credit Suisse is only getting paid on the brokers that go to Wells Fargo, in which case UBS is availing itself of a generally experienced, internationally-flavored brokerage force without paying anything for it [to UBS],” he said.
Several ex-Credit Suisse brokers at UBS have been subpoenaed for information, and UBS lawyers have told them to retain accurate records relating to their employment or prospective employment since September 1, according to the notice reviewed by AdvisorHub.
