Morgan Stanley dinged for wealth management team's approaches to ex-clients

Morgan Stanley and two of its brokers will have to pay more than $300,000 over contract breach and other claims arising from the pair of advisors' departure from the broker-dealer affiliate of Huntington Bank in Ohio.

A Financial Industry Regulatory Authority arbitration panel ordered Morgan Stanley as well as James Patrick Riepenhoff and Frank Daniel Nobile, both dually registered brokers and advisors at the wirehouse, to pay Huntington Financial Advisors $334,153.33 over claims of breach of contract, breach of fiduciary duty, breach of duty of good faith and loyalty, and interference with actual or prospective contracts or business relations. 

The decision, handed down on May 19, came in response to allegations that Riepenhoff and Nobile violated their "contractual obligations by improperly soliciting their customers to encourage them to transfer their accounts to Morgan Stanley even before they were formally registered with Morgan Stanley."

Morgan Stanley denied all the allegations. In a counterclaim, Riepenhoff and Nobile argued they had exceeded industry best practices in their departures. Riepenhoff and Nobile sought $430,500 in lost business income, and Nobile separately requested $14,053 plus 3% interest for lost wages. The counterclaims were all rejected.

Attempts to reach lawyers representing Riepenhoff and Nobile were unsuccessful. Morgan Stanley declined to comment, and Huntington Financial Advisors couldn't be reached.

Despite Hungtington's victory, the award amount it received was far less than it had requested. Huntington Financial Advisors' initial claim to FINRA, the broker-dealer industry's self-regulator, had sought $1.16 million in cumulative damages and $2.32 million in punitive damages.

Read: Former financial advisor gets 10 years for fraud

The case illustrates the difficulties firms can run into when they recruit wealth management teams from competitors and expect their clients also to make the transition. Morgan Stanley was ordered by a separate FINRA arbitration panel in March to pay $7.3 million to Charles Schwab over allegations related to its recruitment of a pair of advisors from that rival firm. 

Riepenhoff and Nobile are part of a wealth management team at Morgan Stanley called Avanti Bridge Group in Dublin, Ohio. Huntington Financial Advisors reported nearly $4.3 billion in assets under management and nearly 400 registered brokers in its latest Form ADV, filed with the Securities and Exchange Commission on March 29. 

According to FINRA's BrokerCheck database, both Riepenhoff and Nobile left Huntington Financial Advisors in 2021. Before that, Riepenhoff had worked for Hungtington since 2009 and Nobile since 1993. Neither broker had any disclosures of customer complaints or similar events on their records.