A Merrill Lynch advisor and his employer owe nearly $500,000 in damages for breach of contract and interference with client relationships to Charles Schwab, a FINRA arbitration panel has ruled.
The dispute began when New York-based advisor Joshua Haron jumped to Merrill from Schwab, where he worked from 2008 to 2012, according to FINRA records.
Schwab -- which is not a member of the Broker Protocol -- claimed breach of contract, misappropriation of trade secrets and unfair competition, among other complaints; a Schwab spokeswoman says Haron violated the terms of a customer nonsolicitation agreement. In arbitration, the firm asked for about $1 million in compensatory damages and attorney fees, records show.
Earlier this month, a panel found Haron and Merrill jointly liable for about $400,000 in damages and attorney fees. The panel also found the wirehouse liable for $100,000 for failing to retain telephone records.
"We are pleased that the FINRA arbitration panel agreed that this type of behavior is not acceptable. Our practice is to take aggressive steps to protect our clients' confidentiality," a Schwab spokeswoman says.
A spokesman for Merrill Lynch, however, says the firm disagreed with the panel's decision and believes that Haron acted appropriately; he added that Merrill would cover the award.
This is not the first time that Schwab, which has about 1,100 advisors working for its private client group, has fiercely defended its client base.
Last month, Schwab won a similar arbitration case involving Merrill and advisor David Hanford, who moved to the wirehouse from Schwab in 2013. The arbitration panel in that case awarded Schwab about $250,000 in damages for breach of contract and interference with business relationships -- although that was far short of the roughly $1.2 million that the firm had requested.
The firm has pursued other arbitration cases involving departing advisors, although it hasn't always emerged victorious. Last year, for instance, Schwab lost a $15 million claim against Morgan Stanley in arbitration.
That case stemmed from the departure of 10 San Francisco-based advisors who had joined Morgan Stanley; Schwab had sought the damages for reasons similar to those in the other cases, including breach of contract and interference with business relationships.
Although the arbitration panel denied Schwab's claims, it did order Morgan Stanley to pay about $71,000 in damages for monetary sanctions. The panel did not explain the ruling.
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