On February 2, 2023, a FINRA arbitration panel awarded the Claimant, Wells Fargo Advisors, LLC a sum of 15,300,000.00 in Compensatory Damages and over $4,000,000.00 in additional costs and attorney fees.
Case Summary:
In October 2018, Kent Jackson Rhoades left his job at Wells
Fargo Advisors, LLC in Mountain Home, Arkansas to start an independent
financial consulting firm with Raymond James Financial Services, Inc. Rhoades
not only left the corporate company to venture out on his own but also hired on
a 12- person team, all of which worked under Rhoades at Wells Fargo, and named
them the Financial Services and Investment Strategies Group. It is important to
note that the Wells Fargo branch is no longer in business.
In August of 2020, Wells Fargo filed a complaint alleging
Raymond James Financial Services and Kent Jackson Rhoades led a “coordinated
raid.” What is a raid you might ask? A raid is poaching another financial
advisor’s team or clients with the intent of harming that firm’s business. One
might not see a case regarding “coordinated raids’ because they don’t happen
frequently and are difficult to prove. FINRA rule 2010 states, “A member, in the conduct of its business, shall observe
high standards of commercial honor and just and equitable principles of trade.”
While a little vague, under this rule, a financial firm cannot ethically poach
a significant portion of another firm’s team
and/or clients, and in October 2018, Raymond James Financial Services did just
that.
Wells Fargo claimed Raymond James
took the entire financial advisor team, as well as clients that Rhoades had
been working with over the 20 years he worked at Wells Fargo. Wells Fargo
sought damages, costs and fees against Raymond James Financial Services, Kent
Jackson Rhoades and the 12-person team that collectively moved from Wells Fargo
to Raymond James Financial Services. Rhoades claimed that the clients at Wells
Fargo moved to his firm due to the “untruths and/or deception [which] caused
clients to sever their relationships.” Rhoades and the 12 pursued a
counterclaim award against Wells Fargo as well. However, on August 25,2022,
Wells Fargo dropped the claim against the 12, and the 12 dropped the
counterclaim against Wells Fargo, leaving just Rhoades and Raymond James
Financial.
After multiple hearings, FINRA
awarded Wells Fargo Inc. $15.3M in compensatory damages (with a 6% annual
interest rate), $3.5M in attorneys’ fee, $847,000 in costs, $1M in punitive
damages, a $500 non-refundable claim filing fee, and $53,775 in hearing session
fees totalling over $20M. The counterclaim was completely dismissed and all
claims for relief for Raymond James Financial Services were denied.
+ Awards
are rendered by independent arbitrators who are chosen by the parties to issue
final, binding decisions. FINRA makes available an arbitration forum—pursuant
to rules approved by the SEC—but has no part in deciding the award.
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