J.P. Morgan Securities is actively seeking a judicial injunction to prevent 16 ex-advisors from First Republic from advancing counterclaims in arbitration with Finra, the brokerage industry’s self-regulator.
This move follows the acquisition by parent company JPMorgan Chase of most of First Republic’s assets last spring, a transaction facilitated by the Federal Deposit Insurance Corp during the regional banking crisis.
The advisors are implicated in a demand to return over $90 million linked to recruitment loans issued by First Republic prior to its failure. The FDIC had established a deadline of September 5, 2023, for former employees to lodge claims against First Republic. J.P. Morgan asserts that the advisors failed to meet this deadline and is requesting a federal court to prevent them from pursuing claims through Finra.
Michael Taaffe, representing the advisors, characterizes J.P. Morgan's legal action as an inappropriate effort to meddle with the ongoing arbitration at Finra. He points out that the bank had previously raised similar arguments to dismiss the advisors’ claims in the Finra forum, which were decisively rejected by the arbitration panel.
“J.P. Morgan, dissatisfied with the arbitration outcome, now seeks to persuade a federal judge to direct the arbitrators towards a different decision,” Taaffe stated, accusing the bank of attempting to coerce and intimidate the arbitration panel.
The advisors are claiming damages exceeding $270 million due to the downfall of First Republic, a figure that surpasses the $92.4 million J.P. Morgan alleges is owed by the advisors for their recruitment loans. The initial arbitration session is slated for May 20.
A representative for J.P. Morgan declined to comment on the criticisms leveled by Taaffe regarding the lawsuit.
In its legal filing, J.P. Morgan argues that the missed September 5 deadline by the advisors renders their attempts to secure a financial judgment through Finra invalid. The firm emphasizes the urgency of an injunction to avoid the needless expenditure of time and resources in Finra arbitrations for claims it views as legally nonviable and outside Finra’s jurisdiction, which could lead to costly and redundant proceedings.
