By Matthias Rieker
Arbitrators rejected a $15 million damage claim by Charles
Schwab Corp. (SCHW) against Morgan Stanley (MS) over the hiring of
at least 10 former Schwab advisers in California.
Schwab had accused Morgan Stanley of poaching the advisers from
branches in San Francisco and Soquel in 2011 and inducing them to
breach their contracts and take confidential information. A
Financial Industry Regulatory Authority arbitration panel was not
convinced, deciding that Morgan Stanley should pay only $71,578 in
sanctions, according to the ruling dated Friday.
Schwab is not part of a brokerage industry protocol, signed by
many major firms, that spells out important terms of brokers' job
changes. It allows brokers to take names, phone numbers, and
addresses of clients with them. Schwab's own rules are much
tighter.
"We strongly disagree with the panel's decision and are
evaluating our legal options," a spokesman for Schwab said. Morgan
Stanley did "a steady raid on staff and clients," he said. "We
think this arbitration decision is an anomaly."
A spokesman for Morgan Stanley declined to comment.
One of the brokers who joined Morgan Stanley was Peter Chen, who
had about $1.6 million in annual production and managed $170
million in client assets when he left Charles Schwab. Morgan
Stanley fired Mr. Chen earlier this year, alleging improper conduct
related to his hiring, according to his BrokerCheck record.
Mr. Chen didn't answer a phone call and email seeking comment
but, according to BrokerCheck, denied any wrongdoing.
--Write to Matthias Rieker at matthias.rieker@wsj.com
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