Cantor Fitzgerald Sued by Ex-Bankers Over $4 Million FINRA Award

Cantor Fitzgerald LP was sued by four former investment bankers who are asking the court to throw out an almost $4 million arbitration award the firm won against them.

Kevin Phillips, former co-head of Cantor’s power, energy and infrastructure group, filed suit Wednesday in New York state court along with John Bills, Schuyler Fabian and Robert Kavanagh. The men argue that an Oct. 31 Financial Industry Regulatory Authority decision ordering them to repay forgivable loans to Cantor ignored the firm’s own contract breaches.

Cantor began arbitration proceedings against the four in November 2021, after they left to launch boutique investment bank PEI Global Partners LLC. According to Cantor, their departure violated agreements they signed when they joined the firm in 2017 as part of a group recruited from Jefferies Financial Group Inc. Cantor sought around $24 million from the bankers.

The FINRA panel largely ruled against Cantor, apart from the firm’s demand that they repay promissory notes that were part of their 2017 recruitment deals, the men said. But they argue that part of the decision should be set aside because of Cantor’s own violations, including trying to force them to bear the costs of a settlement with Jefferies.

“Cantor’s breaches of those agreements actually excused any obligation” to pay back the forgivable loans, the four said in their suit.

A spokesperson for Cantor declined to comment.

The bankers were part of a larger group recruited to Cantor from Jefferies as part of a push into underwriting and advisory work by the traditional trading-focused firm. According to the suit, the power, energy and infrastructure team quickly proved a success.

“By the end of 2020, Cantor was well beyond break-even on its investment investment in the global team and had already made more than double its initial investment in the New York team,” the bankers claim.

Despite this success, Cantor allegedly began reneging on its promises to the men. The firm changed the group’s revenue share formula to “eviscerate” its 2021 bonus pool and then reformulated the basis for revenue recognition, knowing “this seemingly innocuous change would have the effect of reducing by 100% the cash portion of the global team’s expected March 2022 bonus pool,” according to the lawsuit.

Cantor also breached its pledge to indemnify the men against legal claims, the four say, noting they anticipated being sued by Jefferies over their departure. But, after a settlement in principle was reached with Jefferies, Cantor allegedly sought to “re-trade” the indemnification agreements, demanding that Phillips and the others “bear the lion’s share of the cost of the settlement.

When they protested, Cantor expressly repudiated the indemnification agreement and also excluded them from its settlement with Jefferies, the men claim.

FINRA ruled that Phillips had to repay $3.1 million to Cantor; Bills, $379,000; Fabian, $283,000; and Kavanagh, $115,000.

To contact the reporter on this story:
Greg Farrell in New York at gregfarrell@bloomberg.net

To contact the editors responsible for this story:
Anthony Lin at alin364@bloomberg.net

Anthony Aarons

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