Financial Industry Regulatory Authority arbitrators have ordered Charles Schwab to fork out about $347,000 to the owner of Laguna Financial Group, a move the RIA’s attorneys hailed as “another victory in the fight against corporate greed.”
Schwab, though, took issue with the arbitration panel’s decision that it violated its own policies and procedures. Spokesman Pete Greenley said Thursday: “While we disagree with the outcome of this case, we are pleased to have this matter behind us.”
After 18 hearing sessions and eight pre-hearing sessions, the three-person FINRA panel ruled that Schwab was liable for $200,000 in compensatory damages, about $47,001 in costs and $100,000 in attorneys’ fees, according to the Aug.1 arbitration award.
Laguna Beach, California-based LFG and its CEO, Joseph Ziomek, filed a FINRA arbitration claim in late 2016 against Schwab, claiming the company clandestinely helped Kaitlin Hewell — LFG’s former chief compliance officer — ask LFG clients to move their assets to her own, separate RIA firm. They also said Schwab knew Hewell’s firm was a direct competitor of LFG.
Schwab served as the custodian for both RIAs at the time. LFG and Ziomek sued Hewell over these activities in 2013 in the Superior Court of California, Orange County.
It was “inadvertently disclosed” to Ziomek several years later that Schwab’s conduct violated the custodial firm’s policies and procedures, and Schwab ended its custodial relationship with LFG, according to Girard Bengali, the law firm representing Ziomek and LFG.
“This case involved business and ethical violations by Charles Schwab in its capacity as a broker-dealer firm administering custodial platform services to an RIA,” Robert J. Girard II, a co-founder of Girard Bengali, said in a statement.