Finra panel hands win to Stifel on Wachovia raiding case

Wachovia Securities LLC of St. Louis last month lost an important raiding case to crosstown rival Stifel Nicolaus & Co. Inc., which has had success cherry-picking brokers and managers from its competitor.

Wachovia Securities LLC of St. Louis last month lost an important raiding case to crosstown rival Stifel Nicolaus & Co. Inc., which has had success cherry-picking brokers and managers from its competitor.

A three-member arbitration panel of the Financial Industry Regulatory Authority Inc. of New York and Washington dismissed Wachovia’s claims that Stifel had “committed an actionable raid, interfered with contractual relations and misappropriated trade secrets.”

The award, however, was stipulated, meaning that the named individuals, including former A.G. Edwards branch manager Samuel Slayden and three other former Edwards employees, agreed ahead of time to parts of the decision.

Competitors are well aware of the hardball legal strategy Wachovia is using against A.G. Edwards brokers who have defected, industry observers said, but are still pursuing the brokers.

After Wachovia announced that it was buying A.G. Edwards & Sons Inc. of St. Louis last May for $6.8 billion, Stifel bagged a passel of A.G. Edwards’ 6,600 reps.

John Lee, a former A.G. Edwards Western regional manager, joined Stifel last August as a managing director in charge of West Coast recruiting, and at least 10 reps followed.

Wachovia then went on the legal offensive, hitting a number of former A.G. Edwards reps and employees who left for Stifel with lawsuits, which later wound up being dismissed or moved to arbitration. (InvestmentNews, May 19).

Those claims alleged the former A.G. Edwards reps and employees committed infractions ranging from misuse of trade secrets to breach of duty.

Mr. Slayden used to run A.G. Edwards’ Santa Rosa, Calif., office. Last September, he opened an office for Stifel in the same building as the A.G. Edwards branch. At about the same time, A.G. Edwards and Wachovia filed at least 10 suits against its former California employees. (InvestmentNews, Oct. 29)

And St. Louis-based Stifel continues to gain former Edwards employees.

Over the past few weeks, Stifel has hired seven investment bankers from Wachovia Securities who specialized in public financing.

A Wachovia spokeswoman, Teresa Docherty, declined to comment about losing the arbitration claim of raiding to Stifel and also would not comment about how many A.G. Edwards brokers have left the firm since the acquisition.

She acknowledged, however, that Wachovia Securities’ rate of “regretted attrition” — industry shorthand for the loss of desirable reps — was about 3%, in line with the firm’s goal at the outset of the merger.

However, “we’ve had great results in terms of hiring thus far this year,” Ms. Docherty wrote in an e-mail.

“In fact, this past April was the largest [rep] hiring month in our firm’s history and we expect to have comparable results in May.”

Losing the raiding claim against Stifel could cost Wachovia more brokers, one recruiter said.

“If a couple of brokers can leave without harm, it could lead to more,” said Larry Papike, president of Cross-Search, a recruiting firm in Jamul, Calif.

The former A.G. Edwards brokers have been particularly ticked off about the imposition of tiered interest rates on Edwards’ bank deposit sweep program, observers said.

The new policies, which also eliminated money fund sweeps for many clients, took effect last month.

The recent disarray at parent Wachovia Corp. of Charlotte, N.C., could also affect brokers, observers said.

The bank’s board forced out chief executive Ken Thompson at the start of the month, and shares of Wachovia Corp. fell to a 16-year low last Tuesday after Goldman Sachs cut its price target on the bank, which lost $708 million in the first quarter.

Wachovia’s shares touched $16.96 that same day, their lowest price since 1992.

Competitors, meanwhile, continue to pick off former A.G. Edwards reps and valuable client accounts.

At Raymond James Financial Services Inc., for example, the ratio of client accounts transferred into the firm from Wachovia and from former A.G. Edwards reps has been much greater than accounts that have moved the other way, said William C. Van Law III, senior vice president and national director of business development.

He said that Raymond James Financial Services had picked up 6.9 accounts from Wachovia and Edwards for every one lost to Wachovia and Edwards over the 12 months that ended in March.

Mr. Van Law declined to cite the total number of accounts the firm had gained from Wachovia, but said the volume is “just off the charts.”

Raymond James Financial Services is the independent-contractor broker-dealer arm of Raymond James Financial Inc. of St. Petersburg, Fla.

E-mail Bruce Kelly at [email protected].