A FINRA arbitration panel ruled a Wells Fargo adviser and the wirehouse liable for $1.1 million in damages over allegations he stole client data from UBS.
The arbitration panel's ruling resolves a long-running dispute over whether or not David Kinnear broke trade secrets and other fraud and abuse laws, and whether UBS retaliated by making false and malicious statements about their former employee.
UBS claimed that Kinnear had stolen confidential data on thousands of their clients—along with other proprietary information—in the months leading up to his resignation from the firm, according to a copy of the award. The wirehouse also said that after joining Wells, Kinnear used the stolen information to move the business of his former clients, as well as solicit other UBS clients. UBS said motive for the theft was supplied by Wells Fargo, which had tied Kinnear’s financial compensation to successfully moving clients over to his new firm.
In a counterclaim, Kinnear alleged UBS tried to “drive a wedge between” him and his high-net-worth clients. He also claimed the firm made false and malicious statements including claiming Kinnear still worked for them, according to the document.
For its part, Wells Fargo said UBS sought to prevent clients from transferring accounts and changed account numbers, causing confusion and added cost.
BOTH WIREHOUSES LIABLE
The Chicago-based arbitration panel found Kinnear and Wells Fargo liable for $1.5 million in compensatory damages to UBS. UBS was found liable for $400,000 in damages to Wells Fargo. The damages offset.
Kinnear resigned from the firm in February 2012.
In an emailed statement, a spokesperson for Wells Fargo declined comment on the specific case. “Wells Fargo Advisers takes its obligation to protect client information seriously,” she said.
A spokesperson for UBS said the firm was “pleased with the arbitrators’ decision in this matter.”
Kinnear is currently managing director and investment officer of Chicago-based Kinnear Family Wealth Management Group at Wells Fargo. The group serves ultra-high-net-worth clients, according to its website. He did not respond to a phone call requesting comment.
According to the Protocol for Broker Recruiting, advisers can bring some information such as client contact details with them when they leave a firm. They are not allowed to tell clients about a move in advance, or take account numbers or social security numbers with them when they depart.
UBS signed the recruiting protocol in 2004. Wells Fargo signed in 2006.
UBS was angry at Kinnear over an email sent in February 2012 that disparaged the firm to his former clients and others, according to published reports. UBS declined comment on the matter.
Howard Diamond, managing director and general counsel with adviser recruiting firm Diamond Consultants, says the number of disputes between advisers and their former employers has fallen since the protocol was enacted in 2004. However, conflicts still arise.
“They’re more common than they should be, unfortunately,” Diamond says.