Cetera Financial Group's parent, RCS Capital, is suing to stop two former top executives from going to work with their former boss, ex-Cetera CEO Valerie Brown who is now at Lightyear Capital.

Private equity firm Lightyear is the new co-owner of AIG Advisor Group, a top competitor to Cetera, the second-largest IBD in the country in terms of advisor headcount. Cetera has more than 9,000 planners who manage $220 billion in client assets.

The RCS lawsuit seeks to stop Cetera's former chief marketing officer, Susan Theder, and its former senior vice president of strategic operations, Cynthia Hamel, from breaking non-compete agreements they signed when they went to work at Cetera. It notes that another executive, Ahmed Hassanein, its chief accounting officer, also has joined Lightyear and said it expects more talent to depart unless the court intervenes.
"Unless enjoined, the defendants’ actions will cause irreparable harm," the suit says. "Lightyear and its agents have deliberately and knowingly assisted Hamel and Theder to breach their agreements not to compete and Lightyear has flouted the express prohibitions against soliciting senior company employees and officers."

In putting Hamel and Theder back together with Brown, Marron appears to be trying to recreate the winning team that helped build Cetera into a successful acquisition target, says industry consultant Tim Welsh of Nexus Strategy.

'NO TEETH LEFT'

However, unless the two newly departed Cetera executives took large sums of money attached to non-compete agreements, the more generic forms of those contracts, which are often part of employment onboarding, may not stand up in court, Welsh says.

"We know that those are really difficult to enforce because it's a restriction of your civil liberties to pursue opportunities," Welsh says. "I think [Hamel and Theder and Lightyear] said, 'Well, we'll take the risk.' There's no teeth left in Cetera."

A spokesman for Cetera did not immediately return a request for comment.

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