Those Deals Really Are Negotiable! - Adviser Attrition at Barclays

Stifel's acquisition of Barclays' U.S. wealth management unit closes in early December, but the firm may end up with a lot more empty desks than it originally expected. According to press reports just under half of Barclays' U.S. advisers have left for other firms since the deal was announced in June, Stifel said when announcing earnings this week.

The firm expects that 95 to 105 Barclays advisers overseeing $25 billion in assets will transition to Stifel. When the deal was announced, Stifel said that the Barclays unit had about 180 advisers overseeing $57.9 billion in client assets.

Terms of the deal have not been disclosed – making it difficult to judge whether the firm is paying a good price for the unit, insider observers say. Yet by one measure, the Barclays unit will contribute less to Stifel's revenue.

The St. Louis-based firm said it now expects the unit to add $210 million to $230 million in revenue, compared to $332 million when the acquisition was first announced.

With Stifel Deal Pending, Advisor Attrition Spikes at Barclays | IAG Breaking News:

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Mark Astarita represents brokers and advisers in their transitions between every major broker-dealer, and has been doing so for decades. He is the founder of SECLaw.com, his web site is www.securitieslawyer.us and his firm's site is www.sacllc.com

Can Stifel Retain the Barclay Advisors?

According to Financial Planning, Stifel's proposed acquisition of Barclays's wealth management unit offers the chance to serve more lucrative high-night-worth clients. But keeping the advisers who serve those clients may prove tricky.

The Barclays deal, for which terms were not disclosed, brings about 180 advisers managing $56 billion in assets. Many of those advisers are legacy Lehman Brothers brokers, and they currently operate from 11 U.S. offices.

For more information, see Is Stifel's Retention Package Enough to Keep Elite Barclay's Advisors?

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The attorneys at Sallah Astarita & Cox include veteran securities litigators and former SEC Enforcement Attorneys. We have decades of experience in securities litigation matters, including the defense of enforcement actions. We represent investors, financial professionals and investment firms, nationwide. For more information call 212-509-6544 or send an email to mja@sallahlaw.com.

Related articles

• Broker-Dealer Rankings, Growth Report Release
• Barclays boosts profits with Lehman resolution 
• Stifel In Lead To Buy Barclays' U.S. Wealth Unit 
• Reviewing Broker Transition Agreements 

NY Attorney General Going too Far?

New York Attorney General Eric Schneiderman filed a lawsuit in June against Barclays PLC accusing the bank of giving an unfair edge to high-frequency traders and lying to other customers about it.
Barclays has now moved to dismiss the complaint, and it said in its court filing that Schneiderman was trying to dramatically expand the powers of the Martin Act, the New York securities statute. According to Reuters, Barclays is arguing that the Martin Act is designed to protect investors in connection with the purchase or sale of a security, and since Schneiderman had conceded in an earlier filing that the lawsuit was based on claims that Barclays had misrepresented how it operated its dark pool rather than about any particular security transaction, the lawsuit cannot be maintained and is beyond the scope of the Martin Act.

"The NYAG's reading of the Martin Act would render the Act virtually unlimited in scope," Barclays said in the filing, a response to Schneiderman's Sept. 16 filing disputing an earlier motion to dismiss the case.

I am not involved in the case, but have been involved in numerous cases brought under the Martin Act. I agree with the legal argument -  allegations that the workings of a "dark pool" were misrepresented is NOT a fraud "engaged in to induce or promote the issuance, distribution, exchange, sale, negotiation or purchase of securities" which is the requirement for a claim under the Martin Act.
However, we faced the same issue years ago with the misappropriation theory of insider trading. Rule 10b-5 requires a fraud "in connection with the purchase or sale of a security." In the 1980s the SEC started bringing claims where the fraud had nothing to do with the actual purchase or sale of a security. The accused did not commit any fraud in connection with the transaction, in those cases the SEC alleged that the defendant committed a fraud in obtaining information and used that information to purchase a security.
My partner and I made that argument at trial, and at the Second Circuit, and in our petition to the United States Supreme Court, to no avail. SEC vs. Materia, 745 F. 2d 197 (2d Cir. 1984) The courts completely re-wrote the statute and figuratively removed the phrase "in connection with the purchase or sale of a security." Years later the Supreme Court adopted this misreading, in United States v. O'Hagan, 521 U.S. 642 (1997)
Barclays has a chance to make law here, but given broad interpretation given to 10b-5, that is going to be a long shot.
For those who are interested:
Section 352-c.

The Martin Act contains both misdemeanor and felony criminal provisions. N.Y. Gen Bus. Law §352-c (McKinney 1996). Subsections one and two of Section 352-c delineate misdemeanor offenses. Id. at §352-c(1) & (2). Subsections five and six define related applicable felony offenses. Id. at §352-c(5) & (6).
Section 352-c(1) makes the following actions misdemeanors when engaged in to induce or promote the issuance, distribution, exchange, sale, negotiation or purchase of securities:

(a) Any fraud, deception, concealment, suppression, false pretense or fictitious or pretended purchase or sale;

(b) Any promise or representation as to the future which is beyond reasonable expectation or unwarranted by existing circumstances;

(c) Any representation or statement which is false, where the person who made such representation or statement:

(i) knew the truth; or

(ii) with reasonable effort could have known the truth; or

(iii) made no reasonable effort to ascertain the truth; or

(iv) did not have knowledge concerning the representation or statement made;

N.Y. Gen Bus. Law §352-c(1) (McKinney 1996).
For more information - Barclays says New York 'dark pool' suit oversteps legal bounds

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--- The attorneys at Sallah Astarita & Cox include veteran securities litigators and former SEC Enforcement Attorneys. We have decades of experience in securities litigation matters, including the defense of enforcement actions and representation of investors, financial professionals and investment firms, nationwide. For more information call 212-509-6544 or send an email.

Dark Pool Investigation Expands

The New York Attorney General is apparently expanding his investigation into dark pools. Mr. Schneiderman has accused Barclays of falsely representing the concentration of high-frequency traders in its dark pool and providing investors with misleading marketing materials. The complaint against Barclays is available online. On Tuesday, UBS and Deutsche Bank of Germany became the latest banks to disclose that they were facing inquiries from regulators

Dark pools are trading venues which allow investors to trade, without doing so in the public markets. So, if you are an institution looking to buy a large block of shares, you know that your initial trades, if handled on the exchanges, are going to cause a price increase and thereby cost you more money. Dark pools allow investors to make those trades privately, and the pricing announced afterwards.

Of course, this is a problem since there is no reporting of the trade, or the pricing, which undermines the validity of the price of securities and the entire system lacks transparency. When shares trade on an exchange, orders are visible to everyone, and the executions are posted immediately. No so with a dark pool. The Pool will match buy and sell orders, but do not display the results.
The lack of transparency is an issue - and according to the Attorney General, there are claims that forty percent of all equity trades are executed in dark pools.
In the Barclays case, which also includes allegations regarding high frequency trading,  the attack is not on the dark pool itself, which is not illegal, but rather on the marketing of the dark pool.
The inquires at UBS and Deutsche Bank are reportedly into the same areas, but the details have not been disclosed.
For more information - UBS and Deutsche Bank Disclose New Inquiries Over 'Dark Pools'
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The attorneys at Sallah Astarita & Cox include veteran securities litigators and former SEC Enforcement Attorneys. We have decades of experience in securities litigation matters, including the defense of enforcement actions and representation of investors, financial professionals and investment firms, nationwide. For more information call 212-509-6544 or send an email.