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Wells Fargo to Pay UBS $1M Over Broker Departure

A FINRA arbitration panel has ordered Wells Fargo Advisors LLC (WFC) to pay UBS Financial Services Inc. $1.1M to resolve a claim involving financial adviser David Kinnear who went to work for the Wells Fargo & Co. brokerage arm after leaving the UBS Group AG (UBS) unit. UBS claims that Kinnear stole thousands of client and business records, as well as proprietary information, after resigning from the firm.

The Wall Street Journal reports that according to a source, Kinnear downloaded the data and distributed it to clients. UBS contends that the compensation Kinnear received at Wells Fargo was related to his ability to successfully bring UBS clients with him. UBS also claims that Kinnear owes it promissory notes.

Wells Fargo denies UBS’s allegations. It submitted a counterclaim accusing the firm of unfair completion, including preventing clients from moving from UBS to Wells Forgo.

Under the Protocol for Broker Recruiting, brokers are only allowed to bring the names and contact information of clients that they serviced while having worked at a firm when moving to another brokerage firm.

The FINRA arbitration panel said that Wells Fargo and Kinnear were jointly and severally liable. However, UBS has to pay Wells Fargo $400K in damages.

In another high profile case over a broker leaving a firm and who gets to keep the clients, James Bashaw, a former star financial adviser at LPL Financial (LPLA) has filed an arbitration claim seeking $30M from that firm. Bashaw claims that LPL stole clients from him.

LPL fired him for alleged company policy violations. Bashaw, however, contends that the audit of his Houston branch was rigged. He said that the broker-dealer never specified what the policies he allegedly violated were or what he did to violate them.

Bashaw also claims that the language used in his termination notice and the media coverage of his firing delayed his being able to register with another brokerage firm, which hurt his ability to make money. He believes that this gave LPL more time to take his clients and his employees.

According to his FINRA BrokerCheck profile, Bashaw was fired for taking part in private securities transactions without notifying LPL or getting their approval, engaging in business that created a possible conflict of interest, again without telling the firm or getting it’s approval, and borrowing money from a client.

Bashaw’s case, however, alleges widespread compliance issues at the firm. He believes that these issues played a part in his firing. Bashaw claims that he complained about the supervision and compliance while at LPL.

In ’15 and ’14, LPL has paid $70M in restitutions and fines for compliance issues.

In other news, Former brokers of Credit Suisse (CS) are also angry with their former employer. The firm recently shut down its U.S. wealth management business. Now, dozens of advisers are still waiting for their deferred compensation.

Credit Suisse had made an exclusive recruiting deal with Wells Fargo and it is now withholding the money from about 125 advisers who opted to go elsewhere. The firm says that because they quit voluntarily they lost their right to deferred compensation.

Because Credit Suisse has taken this stance regarding who is entitled to deferred compensation, some advisers may lose anywhere from $100K to several million dollars. A number of these brokers said they did not resign voluntarily, and they are filing claims.

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