Stephens Inc., a privately held financial services firm in Little Rock, Ark., has won an $18 million arbitration claim against Benjamin F. Edwards & Co., a dually licensed advisor and broker-dealer, claiming that Edwards poached four of its advisors. The claim was supported by an arbitration panel of the Financial Industry Regulatory Authority.
Stephens claimed that Edwards raided its talent by hiring four members of its Jonesboro, Ark. branch: Brian Todd Erwin, Timothy Garry Fitzgerald, Jeffrey Lynn Green and Malcolm Andy Peeler. The firm also claimed breach of contract and fiduciary duty, unfair competition and unjust enrichment against the four advisors, who left Stephens over an 11-month period from 2016 to 2017, according to the complaint.
Stephens claimed that the departures caused severe harm to its business unit and accused Edwards of predatory intent in its hiring of the four advisors, which severely crimped Stephens’ profits.
“The lost production of the four FAs and sales assistants was well over 50% of annual production,” the company claimed in the arbitration filing.
In its definition of raiding, Stephens argued that Benjamin F. Edwards Inc.’s actions were part of a continuous, single hiring plan.
“Multiple e-mails and texts evidenced that BFE employees, including [Benjamin F. Edwards IV, the company founder], intended to hire the four FAs in violation of their own definition of raiding. Also, the four FAs, in their testimony, all defined raiding as taking more than 50% of a firm’s production. They all agreed that taking all four FAs was improper. They simply disagreed that it was one continuous plan.”
In its appeal that the move to hire employees was continuous, Stephens argued that the first ones to leave offered enticements to the others.
“Efforts to recruit Gay were nixed by Gay’s early and clear expression of disinterest,” the complaint read. It added that a Benjamin F. Edwards Inc. employee sought help from Peeler early on.
“Peeler responded with energetic and sustained effort to recruit the other three financial advisors and [Stephens’] financial advisors from other locations. He also helped recruit financial advisors from the Wells Fargo office in Jonesboro. Peeler and Erwin continued to provide advice to [Benjamin Edwards] recruiters throughout the process.”
The complaint said that Edwards’ offering of employment to Peeler and Erwin depended on their also enlisting Fitzgerald and Green.
“Peeler, Fitzgerald and Green all agreed that they could not move together at one time, as that would be raiding. Peeler’s behavior was especially egregious before and after his departure from [Stephens]. He consistently, flagrantly violated any duty of loyalty to Claimant, breached his contract, and aided an outside firm in their raiding efforts." At one point, an Edwards employee became concerned that Peeler’s attempts to entice the others could "blow his cover."