Growth Capital Securities, a registered broker-dealer specializing in private securities, was ordered by Finra to pay Intellivest Securities more than $900,000 in an arbitrated dispute over employee- and client-poaching, according to an agency filing.
In what is the second arbitration involving this matter, Intellivest President and CEO Daniel Kolber alleged in his complaint that Growth Capital Securities had raided his employees, misappropriated trade secrets, induced breach of fiduciary duty and duty of loyalty, engaged in unfair competition and unjustly enriched itself, among other claims, according to the award document.
Growth Capital Securities could not be reached by press time.
The allegations before Finra arose out of the April 2018 departure of broker-dealers Shawn Lesser and David Whelchel, who left Georgia-based Intellivest to expand their own firm, Big Path Capital, by affiliating with Growth Capital Securities.
Because Intellivest was a small registered broker-dealer with fewer than 10 employees, the departure of Lesser and Whelchel amounted to Kolber losing all four of his registered reps, as they took Nancy Rosensweig and Jyoti Aggarwala with them, Kolber said. Rosensweig is still with Growth Capital at a different affiliation, Values Aligned Capital, and Aggarwala is at Profor Advisors, according to BrokerCheck.
Lesser and Whelchel also took clients with them to the extent that Kolber “was forced to cease virtually all its business operations,” according to the Finra filing.
“I did this or one reason and one reason only. It’s a David and Goliath thing,” Kolber, in an interview, said of his suit against Growth Capital, citing the statistic that 47% of all broker-dealers have fewer than 10 registered reps. “I’m standing up for the small broker-dealer not to be bullied. They took dozens of Intellivest clients. Because I’m just one guy, a 68-year-old guy, they thought they could leave me and take all my clients. Well, I’ve been vindicated.”
Although he had requested more than $12.5 million in relief, Kolber said he was happy with the award he received, which included $440,187 in compensatory damages, $150,000 in punitive damages, $21,742 in costs, $295,000 in attorneys’ fees (Kolber was his own attorney) and $2,000 to cover part of the filing fee.
“I was a small operation, grossing up to $2 million in revenue. That’s not bad for a little broker-dealer,” Kolber said, adding that following the disruption to his firm in 2018 he basically retired except to work on his Finra case.
Intellivest specialized in connecting companies and investors in private placements in the environmental, sustainability and governance space. According to Kolber, the firm developed and perfected a model wherein they would rep small issuers of Reg D securities in a networking event that would bring the issuer and accredited investors together.
This is the second Finra arbitration surrounding Kolber and his former employees. In 2018, soon after they left, Lesser and Whelchel claimed Kolber still owed them commissions from ongoing relationships that remained at Intellivest, Kolber said.
In that case, Lesser and Whelchel’s complaint alleged breach of contract, breach of the implied covenant of good faith and fair dealing and breach of fiduciary duty, according to that Finra decision. Kolber’s counterclaim cited breach of their agreement, misappropriation of trade secrets, breach of contract, willful infliction of mental anguish, defamation, fraud, unfair competition and unjust enrichment.
On Feb. 18, 2020, a Finra panel dismissed both the claim and the counterclaim.