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$21 Million FINRA Arbitration Claim involving Broker Recruiting Protocol

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Jul 26, 2010 11:56 am
 FINRA Arbitration Case: The $21 Million Broker Recruiting Protocol Claim In a Statement of Claim filed in May 2009, Claimants NRP Financial, Inc., National Retirement Partners, Inc.,and NRP Advisors, Inc. alleged that as part of the December 5, 2008, stock buy-back transaction, the parties entered into a Transition Agreement providing for the orderly transition of Respondent Walker Bafs Retirement Group, Inc. (WBRG) to Respondent Wade Alan Walker (Walker) and Respondent Jeffrey Brian Bats (Bars) from NRP; payment of the Secured Promissory Note from the Applicable Earnings of WBRG; and certain payments to be made by NRP during the Transition Period as defined in the Transition Agreement.

Claimants alleged that Walker and Bafs

solicited and knowingly interfered with business relationships between Claimants and their clients; committed several other acts in material breach of the Transition Agreement; and essentially stripped WBRG of ite assets and left it as an undercapitalized and empty corporate shell that is unable to pay the NRP Secured Promissory Note or function as a profitable business.

The $21 Million Counterclaim

Respondents generally denied the allegations, asserted numerous  affirmative defenses, and counterclaimed for $21,119,000 in compensatory damages. Respondents alleged in their Counterclaim that Claimants had engaged in fraudulent and negligent acts in order to induce Walker and Bafs to contemplate transferring with their clients to NRP. Respondents alleged that NRP falsely misrepresented to Walker and Bafs during their recruiting efforts that the firm was a Broker Recruiting Protocol signatory, which would have pemiitted Walker and Bafs to move freely to NRP and take with them the client information necessary to transition their pension clients to NRP. Respondents alleged that as a result of NRP's negligence, Merrill Lynch terminated Walker and Bafs, and then had them barred by court order from contacting their citents for nearly five months. Combined with the fact that NRP was not a signatory to the Broker Recruiting Protocol, NRP's premature disclosure devastated Respondents' client base, forcing them to leave behind nearly the entire client base at Merrill Lynch.

How did the FINRA Arbitration Panel rule?