A federal judge on Tuesday denied Merrill Lynch's request for a temporary restraining order in its case accusing 12 breakaway advisors, Charles Schwab and Dynasty Financial Partners of staging a corporate raid on its $129 billion Atlanta-based Global Corporate and Institutional Advisory Services business.
Merrill, which filed a lawsuit last week, sought to bar the defendants, including the new Dynasty- and Schwab-affiliated RIA the advisors formed — OpenArc Corporate Advisory — from soliciting Merrill clients and prospects and from encouraging its employees to leave, among other requests.
The judge denied the motion for a temporary restraining order and preliminary injunction, staying the case pending Financial Industry Regulatory Authority arbitration.
"Yesterday's court decision is a watershed moment for the wealth management industry. It acknowledges the strength and sophistication of the independent movement. The judge found no evidence to show that the protocol for broker recruitment was not followed. The Court also noted that OpenArc, Dynasty and Schwab acted in good faith," Dynasty CEO Shirl Penney said in a statement.
"We will always stand for and advocate for client and advisor choice which is at the core of what the independent movement is all about," he added.
Merrill said in a statement: “The injunction hearing is only the first step in the litigation process. We look forward to vigorously pursuing this matter in arbitration and are confident that a FINRA panel will agree that the defendants engaged in a corporate raid and conspired to poach our employees and clients.”
Schwab, which is providing custody services to OpenArc and holds a stake in Dynasty, an investor in the new RIA, said in a statement: “As we said in our filing, the allegations against Schwab were not facts but rather unfounded speculation. We are pleased that the Court agreed. We hold ourselves to the highest standards of integrity and our business practices are rooted in respect for individual choice and fair competition. And our unwavering commitment to our clients is our guiding priority.”
Dynasty said last week that 120 Merrill staff members, including 70 financial advisors, had moved to OpenArc.
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