Charles Schwab & Co. has accused a California-based firm of allowing a former Schwab financial consultant to improperly obtain and use client information, according to Financial Advisor..
Schwab filed a lawsuit in U.S. District Court in California against Davies Financial Advisors, an RIA in Murrieta, Calif. in a matter involving Brett Griffin. tn the suit, Schwab says it invested substantial resources to develop and protect its client relationships and private personal information, and provided Griffin, whom it employed as a consultant, with access to that information in exchange for his commitment not to use or disclose trade-secret client data.
Griffin, who is not named as a defendant in the lawsuit, successfully diverted at least $85 million in client assets from Schwab to Davies as he changed firms in early 2024.
While employed by Schwab, and then by Davies as an investment advisor representative, Schwab alleges that Griffin “secretly positioned himself and (Davies) to solicit Schwab’s clients using Schwab’s protected client lists and nonpublic personal information.”
According to the suit, Davies Financial hired Griffin with the hope and expectation that he would divert business to the firm from Schwab. The complaint alleges that Griffin, acting for Davies Financial’s benefit, used Schwab’s trade secrets and confidential information to unfairly compete with the company and to interfere with Schwab’s contractual and business relationships, and to engage in unlawful and unfair business practices.
Schwab said its lawyers sent Griffin a letter in February 2024 letting him know that the firm had received reports of solicitation attempts from former clients and asking him to cease. On March 5, 2024, Schwab said its attorneys also emailed him, asking for acknowledgement of the February 13 letter. According to the lawsuit, neither Griffin nor Davies Financial responded.
“Schwab has confronted [Davies Financial] about this misconduct, but [the firm] has denied responsibility without explanation and has failed to take corrective action, even as it continues to retain and profit from the diverted client relationships and assets,” the lawsuit said. “[Davies Financial]’s conduct was willful and malicious, and [the firm] received great financial benefit as a result of its misconduct.”
Griffin signed a confidentiality agreement upon joining Schwab in 2005 prohibiting the use of Schwab information to compete with the company, according to the lawsuit. In 2016, he signed a subsequent version of the agreement, and again in December 2023 as part of a severance package, the lawsuit said.
The complaint states that the agreement stipulated that if Griffin were to leave Schwab, he would immediately upon his departure delete any connections with clients.
Davies Financial was accused of misappropriating trade secrets, tortious interference with contract, tortious interference with contractual and business relationships, unfair business practices and civil conspiracy. Schwab is seeking damages, restitution, disgorgement and injunctive relief.
Davies Financial’s founder and president, Andy Davies, did not immediately return a call for comment.
The attorneys at Hyman Cotter PC include former senior attorneys at the SEC whose legal experience and industry knowledge make them uniquely qualified to provide counsel on securities regulatory, compliance and enforcement matters. Our attorneys fully understand the regulatory scrutiny financial professionals and their firms face from the various regulators that oversee the financial services industry. If your firm is facing an investigation from a regulatory agency, please contact Hyman Cotter PC at 312-291-4600 or through our online contact form.
