Stifel Loses Raiding Case, Ordered to Pay Over $7 Million in Legal Fees
From the desk of Jim Eccleston at Eccleston Law
Stifel Financial has lost its raiding and breach-of-contract claim against a group of advisors who left its Indianapolis office to establish their firm. Instead, a FINRA arbitration panel has ordered Stifel to pay more than $7 million in legal fees to the advisors, according to AdvisorHub.
Stifel alleged that the advisors orchestrated a coordinated "raid" on its Indianapolis branch before launching their registered investment advisory firm, Sapient Capital, in early 2023. However, a FINRA arbitration panel consisting of two public and one non-public arbitrator rejected Stifel’s claims and found the firm liable under Indiana law for bringing the case in "bad faith" or continuing litigation despite it being “frivolous, unreasonable, or groundless.”
Sapient argued that Stifel pursued the case to appease its top leadership, specifically referencing Stifel CEO Ron Kruszewski.
The advisors claimed Stifel acted against its financial interests by prolonging the litigation and accused the firm of improperly obstructing clients from transferring their accounts. “Rather than facilitate client choice, [Stifel] made it more difficult for clients to transition their accounts and encouraged others not to do so because of its frivolous allegations,” the advisors stated in their arguments.
The panel also ordered Stifel to reimburse Sapient’s private equity backer, Lee Equity, nearly $121 thousand for discovery-related costs and to cover the entire $45.6 thousand in hearing session fees.
While the arbitrators awarded attorneys' fees, they denied the advisors' claims for damages, which included $4.1 million for defamation, $7 million for breach of the Protocol for Broker Recruiting, and more than $50 million in punitive damages.
Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.
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