By David Wignall

Merrill Lynch is trading jabs with a large group of its former financial advisors, Charles Schwab and Dynasty Financial Partners in an escalating legal battle that centers on how those advisors departed Merrill. The parties, which are expected to appear in federal court in Atlanta on Tuesday afternoon, all released sharply worded filings over the last few days.

Last Tuesday, Merrill accused a large breakaway team called OpenArc, along with Charles Schwab and Dynasty, of conspiring to "poach" the wirehouse's business, advisors, and support staff. They said OpenArc's advisors were part of a "corporate raid," and that they had used Merrill's resources, including proprietary information, to facilitate their launch.

Merrill, a unit of Bank of America and one of the nation's largest wealth management companies, asked a federal court in Georgia to issue a restraining order. If granted, the order would prevent the OpenArc advisors from contacting their former clients and disclosing Merrill's trade secrets.

The defendants respond. On Friday, OpenArc's advisors, who were part of a division overseeing $129 billion at Merrill, asked the court to deny the wirehouse's request for a restraining order. Schwab and Dynasty also asked the court to reject Merrill's request.

In their filing, the OpenArc advisors said they hadn't participated in a "corporate raid," as Merrill had alleged, because no outside company had recruited them. "Generally, raiding is understood as a claim against a recruiting firm," they stated in the filing. Instead, the advisors left to start a single independent firm.

The advisors also said granting the restraining order would harm them and the public interest. Unable to contact former clients, the advisors would run the risk of losing client relationships, creating "extraordinary hardship" for their business, the advisors said. Furthermore, customers have the right to know if their broker is no longer servicing their account due to departure, the advisors argued.

The OpenArc advisors also used the filing to share more of their side of the story.

The advisors claimed that Merrill had not "meaningfully invested" in their business division for five years, leading to "staggering losses of clients that was not sustainable." As a result, the advisors decided to open their own business "as a Plan B," according to the filing.

In the days leading up to the advisors' departure, Greg McGauley, the head of Merrill Private Wealth Management, learned of the advisors' plans and "begged" for an opportunity to retain the team, the advisors alleged. The advisors agreed to negotiate, but Merrill used the time to "develop a scheme to harm" them before firing them without warning, the advisors' filing said.

"Not only did Merrill 'set up' Defendants to attempt to terminate them, it also dragged their reputations through the mud via the press," the advisors argued.

Schwab and Dynasty also issued filings in opposition to Merrill's request for a restraining order and injunctive relief on Friday.

Schwab argued that Merrill's suit relied exclusively on "rank speculation." "Every actionable allegation against Schwab is based not on facts but instead on nothing more than Merrill's hunches and guesswork," Schwab's filing said.

In its filing, Dynasty said that Merrill, "despite at least a weeklong head start" and full access to its systems and clients, had failed to find factual evidence of the theft of trade secrets. It also accused Merrill of "grossly and willfully" mischaracterizing critical evidence.

St. Petersburg, Fla.-based Dynasty helps financial advisor teams leave national brokerage firms to open their own registered investment advisor firms. Schwab, which is based in Westlake, Texas, is the nation's largest custodian for RIAs. In this role, it safeguards the assets of RIAs' clients. The company was serving as OpenArc's custodian, according to a regulatory filing, and owns a minority stake in Dynasty.

Merrill's response. "This is the tale of a few practice group leaders who became disenchanted with their longtime employer, recognized the value of what that employer built over 20-plus years, and decided they could claim it as their own and monetize it," Merrill argued in a rebuttal, filed Monday afternoon.

In the filing, Merrill argued that the former employees had made extensive use of the bank's resources to facilitate their departure. They claimed several former employees held "multiple, lengthy 'pitch' meetings during regular business hours" to persuade others to leave, published professional marketing videos for OpenArc before their departure, and set up their phone lines to divert incoming client calls to personal cellphones.

Merrill also alleged that at least one former advisor, Robert Heightchew, used his OpenArc email to send an OpenArc marketing video to a Merrill client, two days before he resigned.

The crux. Part of the lawsuit hinges on the Broker Protocol, an industry agreement that permits advisors to take basic client contact information when switching between firms that are signatories to the agreement. In this case, the advisors departed with at least 39,000 lines of client information, according to Merrill's latest filing.

In a statement, a representative for Dynasty said that the firm "takes the protocol for broker recruitment very seriously."

In their filings, the OpenArc defendants said they followed the protocol. "Clear violation" of protocol would be pre-soliciting clients or taking client information beyond that permitted, the defendants said.

In its latest filing, Merrill argued that its former advisors had engaged in "egregious" misconduct and acted in bad faith, including through the pre-solicitation of clients.

Furthermore, Merrill claimed that the protocol didn't apply, because OpenArc allegedly didn't join the protocol until five hours after the defendants resigned. Without the protection of protocol, the advisors weren't protected from litigation and weren't entitled to take client information with them, a Merrill representative said

A representative for OpenArc didn't respond to a request for comment. A representative for Schwab referred to public court filings.

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September 29, 2025 17:08 ET (21:08 GMT)

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