Wells Fargo Loses Long-Running Broker Dispute With UBS

An arbitration panel has ordered Wells Fargo & Co.'s brokerage arm to pay a unit of UBS Group AG $1.1 million to resolve a multiyear dispute over a financial adviser accused of taking confidential account information before leaving the Swiss bank.

UBS Financial Services Inc., the company's U.S. wealth-management arm, filed an arbitration claim with the Financial Industry Regulatory Authority alleging that Chicago-based financial adviser David Kinnear stole thousands of UBS's client and business records and other proprietary information ahead of resigning in 2012 to join Wells Fargo Advisors LLC.

A person familiar with the matter claimed the adviser downloaded client information, statements and reports before he left UBS and at some point distributed this information on flashdrives to clients.

Brokers' moves among the major brokerages are governed by the Protocol for Broker Recruiting, a 2004 accord that has helped limit the number of lawsuits and arbitration claims filed over broker moves. The protocol limits brokers to taking names, addresses, phone number and email addresses for "clients that they serviced while at the firm."

Big brokerages across the industry in recent years have taken greater steps to keep clients amid a wave of adviser departures, including applying greater scrutiny to departing brokers' client lists and the steps advisers take to persuade clients to join them when they leave.

In addition to also claiming that Mr. Kinnear owed an unspecified amount on promissory notes, UBS alleged that Mr. Kinnear's compensation at Wells Fargo was tied to the successful transfer of UBS's clients to the San Francisco-based firm.

Wells Fargo, for its part, denied UBS's claims and filed a counterclaim accusing UBS of unfair competition by refusing to communicate, to provide tax information and preventing clients from transferring accounts from UBS.

A Wells Fargo spokeswoman declined to comment specifically on this case, but said the firm "takes its obligation to protect client information seriously."

She also confirmed that Mr. Kinnear is still employed at Wells Fargo.

A UBS spokesman said the firm "is pleased with the arbitrators' decision in this matter."

In an award document dated Thursday, the arbitration panel found that Wells Fargo and Mr. Kinnear were jointly and severally liable and awarded UBS $1.5 million in damages. Offsetting the award was $400,000 in damages awarded to Wells Fargo, which UBS will have to pay.

As is customary, the Finra arbitrators didn't provide details on the reasoning for their decision.

Write to Anna Prior at [e-mail]

(END) Dow Jones Newswires

May 16, 2016 16:35 ET (20:35 GMT)

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