Hedge fund Element Capital Management has won an arbitration ruling allowing it to enforce a non-competition agreement against a former senior trader, delaying his move to rival firm Squarepoint Capital, according to report by Bloomberg.
An arbitrator ruled last month that Element can uphold a six-month non-compete against Jonathan Dorfman, its former head of equity markets, following a dispute over his planned transition to Squarepoint, where he had been slated to join as Global Head of Equity Capital Markets.
The decision was disclosed after Element asked a New York judge to formally confirm the arbitration outcome. Squarepoint had announced Dorfman’s appointment in April, but the move was put on hold when Dorfman sought to have his non-compete provision voided the following month.
Dorfman argued that the restriction was unjustified, claiming his role at Element did not expose him to confidential information or proprietary trade secrets. However, arbitrator Douglas Schwarz found that Element had a legitimate business interest in protecting proprietary investment tools, methods and systematic strategies that were developed internally and shared with Dorfman during his tenure.
The arbitrator also concluded that the non-compete did not place an undue burden on Dorfman. His employment with Element formally ended in August, meaning the restriction will expire in February. During the interim period, Element continues to pay Dorfman his $400,000 annual salary, while Squarepoint is reportedly expected to pay him a $3m signing bonus once he begins his new role.
The arbitrator also concluded that the skills and insights Dorfman gained at Element would be valuable to a competing hedge fund such as Squarepoint, reinforcing the rationale for enforcing the non-compete.
