While Smith Barney tries its darnedest to hold on to the money of wealthy clients that were invested in two of the firms’ failing hedge funds (subscription required), it’s also having a hard time keeping some of its best brokers. With all the uncertainties and troubles facing Citi, the firm’s prized retail brokerage operation has become a favored target of recruiters, say recruiters.

According to a Journal’s “Heard On The Street” column today, the firm is offering to make clients who invested in the firm’s Falcon and ASTA/MAT hedge funds whole again. That is, just as long as they sign an agreement promising not to sue the firm at a later date. (At least one investor who put in $500,000 already filed a federal lawsuit against Citi, says the Journal. The suit alleges Smith Barney misrepresented the risk profile of the hedge funds, and that the investments were unsuitable.)

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