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FINRA Arbitration Panel Denies Abusive Broker Hiring and Raiding Claims

Recently, on January 11, 2013, a Financial Industry Regulatory Authority, Inc. (“FINRA”) arbitration panel issued an award which denied all claims raised by the broker-dealers Tullett Prebon Financial Services LLC and Tullett Prebon Americas Corp. (collectively referred to as “Tullett”) against BGC Financial, L.P., a global brokerage company, (“BGC”) regarding BGC’s alleged raiding of Tullett’s repo desk in 2011. See FINRA Dispute Resolution No. 11-01413. Tullett filed its statement of claim on April 4, 2011 against BGC and nine of BGC’s repo brokers who allegedly resigned from Tullett in 2011 to join BGC. Tullett brought the following causes of action in its statement of claim: raiding, breach of contract, breach of duty and loyalty, aiding and abetting breaches of duty of loyalty, unfair competition, breach of fiduciary duty, misappropriation of trade secret, tortious interference with contract, tortious interference with prospective economic relationships and violations of FINRA Rules. Further, Tullett requested $16 million in compensatory damages, punitive damages, and a permanent injunction barring BGC from recruiting and hiring Tullett’s employees in the future. BGC and the nine brokers counterclaimed and alleged: breach of contract, violation of New York Labor Law, right to unpaid commissions, right to unpaid expenses and violation of FINRA Rule of Conduct 2010 (Standards of Commercial Honor and Principles of Trade). After 18 hearing sessions, the FINRA arbitration panel denied all of Tullett’s claims, which many will view as reinforcing BGC’s recruitment and hiring practices, with regard to the nine repo brokers, as lawful and in compliance with industry rules. Moreover, the panel ordered that Tullett pay the nine repo brokers compensatory damages for their unpaid commissions and/or expenses in the amount of approximately $365,000.

Lax & Neville LLP has nationally represented both side of this type of dispute as well as individuals, securities industry employees, financial services professionals and securities industry companies in employment matters and securities-related and commercial litigation. Please contact our team of attorneys for a consultation at (212) 696-1999.