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Raymond James and a registered rep, Kent Jackson Rhoades, are on the hook for a nearly $20 million arbitration award from the Financial Industry Regulatory Authority (FINRA) after a “raid” on a Wells Fargo branch in rural Arkansas.
According to the arbitration award signed on Feb. 3, Wells Fargo Advisors flung numerous claims against Raymond James and several former reps, including unfair competition, breach of contract and conspiracy. The award argues Raymond James poached a number of reps in a “coordinated raid” on a Wells Fargo branch office in Mountain Home, Ark., which caused the branch to close.
The individual reps named include Kent Jackson Rhoades, Janet Schmeski, Michael Stockton, Logan Stone, Steven Bettenhausen and David Matty; the first four are currently registered with Raymond James in Mountain Home, while the latter two were registered there until 2020 and 2021, respectively, and are currently not registered, according to their BrokerCheck profiles.
In 2018, Raymond James allegedly approached and recruited the existing Wells Fargo advisors at the Mountain Home branch, according to an individual at Wells Fargo with knowledge of the situation. The departing reps resigned en-masse and set up a new Raymond James shop about a mile away, taking most of the Wells branch assets with them.
Since these branch offices were located in a fairly remote location, Raymond James may have found it hard to recruit new advisors, which could have led them to approach the Wells reps, according to the individual at Wells Fargo.
But Raymond James and the reps denied the allegations. They argued that before they left Wells Fargo, the firm assigned their clients to “replacement financial advisors and that the replacement financial advisors, through untruths and/or deception, improperly caused clients to sever their relationships” with the reps.
“Wells Fargo Advisors is pleased with the outcome and appreciates the arbitration panel’s recognition of the damages caused by this conduct,” Wells Fargo Spokeswoman Jackie Knolhoff told WealthManagement.com (Raymond James declined to comment).
Last August, Wells Fargo withdrew its claims against Bettenhausen, Matty, Schmeski, Stone and Stockton, though the claims against Raymond James and Rhoades continued to stand, according to FINRA. In response, those five reps dismissed their counterclaims, which meant the FINRA arbitration panel “made no determination” on the relief requested by those reps against Wells Fargo.
In total, Raymond James and Rhoades were found to be “jointly and severally liable” for $15.3 million in compensatory damages, as well as annual 6% interest until the penalty is fully paid. Additionally, Rhoades was on the hook for more than $4 million in attorneys’ fees and other costs, and his counterclaim was denied. Raymond James also owes an additional $1 million in “punitive damages,” according to FINRA.
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