FINRA Arbitrators Enjoin Brokerage Raid And Enforce Non-Compete

January 18, 2012

In this matter, the Financial Industry Regulatory Authority ("FINRA") Statement of Claim and Order Granting Temporary Injunction were filed on or about June 13, 2011.  The claims arose in connection with Respondent Thompson's resignation from Claimant SWBC and subsequent employment with competitor Respondent Titleist. According to online FINRA records, Respondent Thompson was registered at Claimant SWBC from January 2007 through May 2011, and thereafter at Respondent Titleist.

The Raid

Claimant SWBC alleged that Respondent Thompson raided Claimant's client information and that Thompson deleted files from his company-issued laptop, all in violation of his employment agreement and covenant not to compete. Claimant further alleged that Respondent Titieist interfered with SWBC's employees and assisted Thompson in breaching his agreements with Claimant. Among other causes of action, Claimant asserted conspiracy, misappropriation of trade secrets, tortious interference, and violation of Regulation S-P. Claimant sought injunctive relief, $500,000 in compensatory damages plus punitive damages.

Respondents Titleist and Thompson generally denied the allegations, asserted affirmative defenses, and Respondent Thompson filed a Counterclaim asserting that Claimant had failed to pay commissions or compensation. In the Matter of the FINRA Arbitration Between SWBC Investment Services, LLC, Claimant/Counter-Respondent, vs. Titleist Asset Management, Ltd, Respondent and Greg Thompson, Respondent/Counter-Claimant(FINRA Arbitration 11-02350, January 10, 2012).


The FINRA Arbitrators found Respondent Thompson liable to and ordered him to pay to Claimant SWBC:

  • $30,800.00 in compensatory damages plus post-award interest at 6% per annum;
  • $1,800.00 in costs; and
  • $30,000.00 in attorneys'fees

Further the Panel ordered that Respondent Thompson to:

  • destroy the original and any and all copies of certain specified tape recordings; and
  • employ a third-party vendor to remove and destroy a specified ACT database and all CD's downloaded from it (including the removal/destruction of all copies on any computers).

Also, the Panel ordered that the parties shall jointly instruct an individual and a company (Mark Hallman and Digital Discovery) to destroy all materials in their possession in connection with this arbitration.

Finally, the Panel permanently enjoined Respondent Thompson, his agents and persons acting in concert with him, including but not limited to any employer, employee or agent of Greg Thompson Financial, LLC from using in any fashion any data of any sort found on the ACT database indentified by Mark Hallman.

The Panel denied Thompson' Counterclaim with prejudice.

Bill Singer's Comment

Fueled in part by the devastation of the Great Recession, we're seeing an increasing number of cases involving departing brokers, their angry former employer firms, and disputes about what was taken and how it was used.  As more and more brokerage firms fall by the wayside or merge into competitors, there will be even more pressure on individual registered persons to decide whether to stay or leave.  All of which will likely add to lawsuits alleging that confidential proprietary data was wrongfully downloaded and used by the "disgruntled former employee."

Consequently, make sure that you know what you can and can't take when leaving your Wall Street employer.  If you signed any employment agreements, be certain to re-read the provisions - especially those addressing non-compete and non-solicitation.  You think that your job is safe and your firm entrenched?  Hey, so did a lot of folks at Wachovia, Lehman Brothers, and Bear Stearns.  Similarly, just how safe are things at Merrill Lynch, Morgan Stanley, Wells Fargo, Citigroup, or JP Morgan?  Hey, one thing for certain: You never know.