Aug 26 Charles Schwab Corp. has lost a
$15 million arbitration case against Morgan Stanley,
which it accused of improperly recruiting brokers from a Schwab
San Francisco branch who left with confidential trade secrets.
The decision by a Financial Industry Regulatory Authority
arbitration panel in San Francisco, dated Monday, ends a dispute
that began in 2012.
Schwab alleged that Morgan Stanley had maliciously organized
an "actionable raid" of its West Portal Avenue branch in San
Francisco, according to the ruling. Schwab also accused Morgan
Stanley of inducing Schwab brokers to breach their contracts.
A Schwab spokesman was unable to immediately comment. A
Morgan Stanley representative was not immediately available to
Claims involving the practice of so-called "raiding" are
typically made when a firm loses 30 percent to 40 percent of the
production - the amount brokers generate in revenue during a
year - from a branch office to another firm in one swoop or over
a short period of time, according to lawyers.
The ruling did not identify the brokers who left Schwab.
While the arbitrators denied Schwab's claims "in their
entirety," they ordered Morgan Stanley to pay Schwab $72,000 in
sanctions. The reasons for the sanctions are unclear.
The three-member panel, as is customary, did not explain the
reasons for the decision.
(Reporting by Suzanne Barlyn; Editing by Paul Simao)