A FINRA arbitration panel awarded Wells Fargo Advisors more than $22 million in damages in an arbitration case against Baird, which the wirehouse accused of raiding one of its branch offices.

Bloomberg News


Such cases have become rare since most firms in the industry adopted the Broker Protocol, which establishes rules for adviser movement between firms.

However, firms can still be charged with raiding claims under the protocol, Alan Foxman, an attorney not affiliated with the case, says.

"In the protocol itself it is one the specific exemptions. Just being a signatory to the protocol doesn't mean you can't [get hit with such a claim]," says Foxman, who is based in Delray Beach, Florida.

A Wells Fargo spokeswoman declined to comment on the case, while Baird disputed the allegations.

"We strongly disagree with what is asserted in this situation and with the findings, and are extremely disappointed in the size of the award," Baird spokesman John Rumpf said in a statement. "In terms of potential impact on our financial results, we will have record revenues for 2016 year and expect operating income in 2016 to be in line with 2015, which was a record year."

He declined to comment further.

In 2015, the Milwaukee-based regional firm reported $1.286 billion in annual revenue and $154 million in operating income. It has not yet reported financials for last year.

A.G. EDWARDS VETERANS
The spat between the two firms started in June 2015 when Baird recruited a group of advisers in Wichita, Kansas. It was a big win for the regional BD as the advisers collectively oversaw about $1.1 billion in client assets.

Baird has had success in recent years recruiting wirehouse advisers; this group included several veteran brokers who had started their careers at A.G. Edwards, which merged with Wachovia and then Wells Fargo in 2008.

In response to Baird's recruiting success, Wells Fargo filed a raiding claim in FINRA arbitration against the advisers and the regional BD in October 2015, according to a copy of the award.

The wirehouse alleged unfair competition and breach of contract among other misconduct against Baird and advisers Don Barry, Jill Docking and her son Brian, Kevin McWhorter, Phillip Garrison and Suzanne Marshall. Wells Fargo later withdrew claims against Garrison and Marshall for unspecified reasons, per the award.

Baird responded with counterclaims of its own, seeking damages for breach of contract and the Broker Protocol. During the arbitration, Baird also requested testimony from Wells Fargo employees, but the panel denied the regional BD's plea in November 2016, per the award.

After 18 hearings, the arbitrators sided with Wells Fargo earlier this month. Wells Fargo won over $20 million in damages against Baird, plus another $1.75 million in attorney's fees and $30,000 in costs, which was in line with what the wirehouse was originally looking for.

The panel also ordered Barry to pay his former employer $542,000; Jill Docking is to pay $181,000; Brian Docking $161,000 and McWhorter $114,000.

The arbitrators not only rejected Baird's counterclaims, but ordered the firm to pay the entire cost of the arbitration hearings, over $21,000. Typically, arbitrators split the cost between the parties.

The panel did not explain its ruling.

Baird could try to vacate or overturn the award in civil court, but the bar for doing so is high.

"Generally, you need to show some bias on the arbitrators or with some major problem with the way the arbitration was handled," Foxman says. "They usually don't overturn awards as they do in a court action because you don't have as many of the same grounds for overturning arbitration awards as you do a court decision."

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