FINRA Arbitrators Dissolve RIA / BD Lacking Operating Agreement

In the Statement of Claim, Claimant requested that the Panel issue an order: awarding unspecified compensatory damages; imposing a constructive trust on all revenue from the Papa transaction clients; directing disgorgement of all profits from the Papa transaction; awarding 40% of all revenue from the clients purchased in the Papa transaction, past and future, less any adjustment for the financing; awarding the value of all lost profits from the interruption of Wharton's recruiting business; awarding damages for all revenue withheld; reimbursement of all added costs incurred by Claimant as a result of Respondent's actions; reimbursement of all other monetary damages incurred by Claimant as a result of Respondent's actions; directing Respondent to dissolve Blue Skies Financial, LLC and assigning the Papa Agreement to Wharton; enjoining Respondent from diverting business away from Wharton; enjoining Respondent from permitting any joint advisors to divert business away from Wharton; enjoining Respondent from continuing to serve as Branch Office Manager or Chief Compliance Officer of Wharton's OSJ; awarding punitive damages; awarding attorneys fees; awarding interest on all monetary awards at the rate of 6%; and any other damages as are deemed reasonable and just. 

In the Statement of Answer, Respondent requested dismissal of the Statement of Claim in its entirety. 

In the Counterclaim, Respondent requested the Panel order dissolution of Wharton Advisory Group, LLC; money damages including quantum meruit; costs; attorneys' fees; and such other relief that the Arbitrators find just and proper.

Claimant requested the Panel dismiss and deny Respondent's Counterclaim.

a. The Receiver is authorized to take charge and enter into possession of all of the property of Wharton, not the limited liability company owing the real property leased by Wharton.

b. The Receiver may appoint (only if he determines is needed) an agent to protect assets of Wharton. 

c. The Claimant and Respondent are to cooperate in requesting, collecting and receiving from the brokers, advisors, occupants, tenants, and licensees of Wharton, or other persons liable therefore all the advisory fees, rents and license fees now due and unpaid or hereafter that become due. If the Receiver finds that the Claimant and Respondent are not co-operating in a timely fashion, then the Receiver shall assume the aforementioned task. Moreover, the Claimant and Respondent, if they agree, or if the Claimant and Respondent disagree or fail to take timely action, the Receiver solely is authorized to institute and carry on all legal proceedings necessary for the protection of Wharton and apply to any court of competent jurisdiction to recover reasonable fees, rents and/or fees and to compel advisors, brokers, employees, tenants and occupants to cooperate with the Receiver, or for the removal of any tenants or licensees or other persons from premises leased by Wharton. 

d. The Claimant and Respondent, the brokers, advisors, tenants, licensees or other persons in possession of or use of Wharton assets are to cooperate with the Receiver and pay over to the Receiver all advisory fees (if any), rents, license fees, and other charges by Wharton now due or that may hereafter become due. Moreover, the Receiver, if he solely decides, may enjoin in writing the Claimant and Respondent and otherwise restrain them from collecting the advisory fees, rents, license fees and other charges of Wharton and from interfering in any manner with Wharton; and from transferring, removing or in any way disturbing any of the advisors, brokers, occupants or employees; and that all advisors, brokers, tenants, occupants, employees and licensees of Wharton and other, persons liable for the advisory fees, rents, and license fees be and are hereby enjoined and restrained from paying any rent or license fees or other charges for Wharton to the Claimant and Respondent, their agents, servants or attorneys as the Receiver solely states in writing with reasonable notice. 

e. Anybody in possession of Wharton's books and records, general ledgers, rent lists, orders, unexpired and expired leases, agreements, correspondence, notices and registration statements shall turn over same to said Receiver immediately upon written request by the Receiver and retain a copy for continuing recording and operation of Wharton until dissolution is completed. 

f. Notwithstanding anything to the contrary contained in this Award, the Receiver shall not, without prior order of a court of competent jurisdiction including prior notice to the parties, make improvements or substantial repairs to the property owned by Wharton in excess of $1,000.00. 

g. Receiver shall deposit all monies received by him/her at received in a bank/ financial institution (mutually decided by the Claimant and Respondent or failing a mutual decision, then by the Receiver) and no withdrawals shall be made except as directed by either a court of competent jurisdiction or on an electronic transfer or draft or check authorized/signed by the Receiver; the Receiver shall furnish the Claimant and Respondent with monthly statements of the receipts and expenditures of the receivership, together with a photocopy of the monthly statements received from the bank/financial institution designated above. 

h. Receiver is authorized from time to time to rent or lease any part of the premises where Wharton is located for terms not exceeding one (1) year or such longer terms as may be required, by relevant law; to keep Wharton's premises and RIA insured against loss (solely determined by the Receiver as to amounts and deductibles) including as a minimum, customary physical damage for the area including at least, fire; to pay the taxes, assessments, water and sewer fees, vault rents, salaries of employees, supplies and other charges; to comply with all the lawful requirements of any federal, state, or municipal department, or self-regulatory authority, or other authority of the federal, state, or municipality or self- regulatory authority where the RIA or its premises are situated; and to procure such liability and other insurance as may be reasonably necessary. 

i. Receiver is prohibited from incurring obligations in excess of the monies available to Wharton without further Order of a court of competent jurisdiction or written consent of the Claimant and Respondent.

j. The Claimant and Respondent shall retain their respective individual clients. Any clients considered to be shared, in part or wholly, by the Claimant and Respondent, shall freely chose in writing which Partner (Claimant or Respondent) that he/she wishes to be associated with, and noting that there may be no monetary reward to any client by any entity to gain favor in this decision. Also note, that neither partner shall owe the other partner compensation for said client or clients. Furthermore, all fees and commissions, earned prior to a shared client making this decision of which partner to associate with, which were historically split between the partners, shall be shared as in the past. Moreover, a partner, including his agent or employee or associate advisor, is prohibited from contacting the other partner's clients for a period of one year from the date of this Award.

k. After paying expenses for the management and care of Wharton, the Receiver shall distribute to the Partners, in equal portions, the balance of Wharton's personal property and of monies, both as the Receiver solely determines, at the completion of the dissolution or at times before the dissolution as the Receiver solely establishes. Any personal property owned by a partner, advisor or employee ("individuals") on the Wharton premises is unaffected by this Award. Any dispute as to what is personal property of Wharton and what is personal property of an individual shall be solely determined in writing by the Receiver.

l. The reasonable fees and costs of dissolving, including but not limited to a mutually agreed upon customary compensation for this task, shall be paid out of Wharton's assets. If Wharton's assets are insufficient to satisfy these obligations, then Claimant and Respondent shall equally bear these obligations. 

m. The Receiver, or any party hereto, may at any time, on proper notice to all parties who have appeared in this arbitration, apply to a court of competent jurisdiction for further or other instructions or powers necessary to enable said Receiver to properly fulfill his/her duties. 

n. If either partner causes the unnecessary delay in winding up the affairs of Wharton, then the other partner is entitled to $2,000.00 per every fraction of or whole calendar day of delay as a liquidated damage upon further application to or a court of competent jurisdiction. 

o. Notwithstanding the above, the Receiver has no authority to wind down the LPL Financial Office of Supervisory Jurisdiction that operates out of Wharton's physical offices. Any issues regarding that commission business are to be resolved solely by LPL Financial.

p. The Respondent and Claimant shall mutually cooperate and pursue the goal of completing all outstanding tax returns as quickly as possible. Any failure to do so may be corrected solely by the Receiver by hiring an account at the delinquent partner's expense to assist in this effort. Even if both partners are working diligently, the Receiver may engage an accountant(s) at Wharton's expense to facilitate filing tax returns. The partners shall sign all tax returns and/or documents for dissolution but not to preclude the Receiver from signing such documents as applicable law and regulation permit. 

q. Unless they both agree in writing, neither partner is permitted to use the name of 'Wharton (singularly or if a compound name includes 'Wharton' is accepted by the Pennsylvania Corporation Bureau) until Wharton is dissolved by all applicable federal and state and administrative organizations including but not limited to FINRA. 

r. Neither the Claimant nor the Respondent shall use for any client communications the Wharton telephone number(s) historically made known to any clients. This prohibition begins two business days from the date of this Award for the next 180 days absent a written mutual agreement of the partners. As soon as possible, the partners shall mutually agree, or the Receiver solely, shall engage for the next six months an answering service to answer the Wharton telephone numbers used for client communications. This answering service shall notify any prospective or established Wharton client of a new telephone number associated with each Wharton advisor. 

s. Wharton shall continue to pay its employees until the Partners mutually agree in writing to cease employment of one or all. If a Partner desires to pay an existing Wharton employee for his own direction, then this Award shall not interfere. If the Partners cannot agree on retaining an employee, then the Receiver shall solely decide to retain a Wharton employee. It is noted that junior licensed brokers work as contractors in spite of some individuals having fixed salary agreements with Wharton. Upon both Wharton ceasing to pay regular wages to its employee(s) and the affected employee(s) is not immediately employed by a Partner for his own direction, Wharton will pay the employee each a lump sum severance payment equal to four weeks of their straight base salary without benefits but with Medicare and social security contributions by Wharton. This severance payment shall be made to the affected employee within the next five business days of their receiving their last regular pay.

• FINRA
• Arbitration
• Operating Agreement
• Dreaded Ds
• Shareholder Agreement
• Buy Sell Agreement
• Operating Agreement
• Override
• Usurpation of Corporate Opportunity
• Dissolution