Jan 14 A unit of Wells Fargo & Co lost a $1.4 million securities arbitration case against Stifel Nicolaus & Co, whom it alleged improperly recruited a group of brokers from a New York City area branch office, according to a ruling.
The decision by a Financial Industry Regulatory Authority panel, dated Sunday, ends a long dispute that began in 2009 and played out during 24 days of hearings, according to the ruling. Wells Fargo Advisors also named a total of 18 Stifel advisers as respondents in the case, which started as three separate cases that were later combined.
A Wells Fargo spokesman declined to comment.
At issue in the case is a practice known as "raiding," according to the ruling. A raiding claim is 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 in one swoop or over a short period of time, say lawyers.
Wells Fargo also alleged, among other things, that the brokers and Stifel interfered with its business relationships and breached their employment contracts. But experts say there can be a fine line between smart recruiting and raiding.
The saga pre-dates Wells Fargo's acquisition of Wachovia Corp in 2008. Wachovia, which purchased AG Edwards Inc in 2008, agreed to move its brokerage business to St. Louis from Richmond, Virginia, as part of the deal. Later, in the depths of the financial crisis, Wells Fargo purchased Wachovia.
Stifel, a unit of Stifel Financial Corp, is also based in St. Louis. Dozens of AG Edwards brokers, managers and support staff defected to the cross-town rival after Wachovia announced it was buying AG Edwards, a firm with more than 7,000 brokers that was founded in 1887.
Wachovia responded with a string of arbitration claims against Stifel and individual brokers and managers. Most have been resolved to date in Stifel's favor. FINRA panels, in two cases, also awarded legal fees to Stifel.
"This case continues to underscore that people are free to work at the place of their choosing," said Ron Kruszewski, chairman and chief executive of Stifel Financial.
The FINRA panel, as is typical, did not include the reasons for its decision in the ruling.