Schwab Awarded 16-Month Injunction Against Broker Who Jumped
A broker who left Charles Schwab for an LPL Financial-affiliated independent firm two years ago agreed to refrain from further calling his former clients for 16 months, but avoided monetary penalties Schwab was seeking, according to a Finra arbitration award.
Wolf was a vice president and senior financial consultant managing $600 million in assets from more than 340 clients when he left Schwab, according to his web biography at Williamsburg Financial, a broker and investment advisor with five advisors. Neither he nor his lawyer, Clinton Marrs, responded to requests for comment on the decision.
Schwab spokesman Peter Greenley said the arbitration, which the firm filed six months after Wolf left, was resolved “to the mutual satisfaction of the parties involved” and illustrates the company’s continuing resolve to pursue advisors who allegedly violate client confidentiality and employment agreement contracts. The San Francisco-based discount broker has reached settlements in at least five cases against fleeing brokers since September 2018.
But the stipulation in the Wolf case may be more of a face-saving gesture for the firm considering that the advisor had operated for two years before the contact bar was approved by arbitrators and allows him to respond to client-initiated contacts during the contact bar, said James Heavey, a lawyer at Barton LLP in New York who represents brokers in disputes with employers.
“This is really not much of a concession at all for the advisor,” said Heavey, noting that Schwab was not awarded any of the compensatory, punitive or other monetary damages and procedural fees it sought. “And he’s already contacted his clients to let them know where he is.” Heavey was not involved in the Wolf case.
Schwab’s Greenley said the firm could not comment on particulars of the case. Unlike many of its other pursuits against fleeing brokers, the firm did not seek preliminary court injunctions barring Wolf from contacting customers and requiring him to return proprietary data simultaneously with filing of the Finra complaint.
In the Finra complaint, Schwab asserted breach of contract, misappropriation and misuse of trade secrets and unfair competition,” a typical litany of charges that it and some of its rivals have lobbied against certain departing brokers. It sought compensatory damages, unjust enrichment damages, royalty damages, lost profits, liquidated damages, arbitration and expert witness fees and punitive damages under Virginia’s Uniform Trade Secrets Act and the federal Defend Trade Secrets Act.
Wolf had requested that Schwab pay expert witness and attorneys’ fees, as well as other costs and Finra surcharges. The three-person arbitration panel, which included one non-public arbitrator, granted no monetary awards to either party.
Schwab and Fidelity Investments in recent years have pursued brokers who worked with wealthy individuals at the discount firms, arguing that the firms’ marketing prowess and internal referral networks were responsible for the brokers’ books of business.