UBS has dropped its legal action against Vestra, the start-up wealth manager it accused of conducting a “smash and grab raid” on its UK wealth management arm.

The Swiss bank sued Vestra, its founder, David Scott, and four departing UBS managers for unlawful conspiracy after 75 of its staff resigned to join the start-up, which is backed by Goldman Sachs.

Both parties confirmed today that they had reached a deal, avoiding a trial that was set to begin in October.

Neither UBS or Vestra would comment on the terms of the settlement but sources familiar with the case said that UBS backed down after Vestra agreed not to approach any of its staff or clients until April next year.

A spokesman for Vestra said: “Following an interim hearing which took place in the High Court pending full trial in October, we are pleased to say that a settlement has now been reached. Due to the confidential nature of this agreement we are unable to comment any further.”

UBS was stunned on May 19 when 52 employees resigned to join Vestra, followed later by a further 23 staff. The Swiss bank claimed its UK wealth management arm was left “devastated” by the departures, with one department so ravaged that it was left with only a secretary.

UBS accused Mr Scott, its former senior UK private banker, of using former colleagues inside the bank as recruiting sergeants in a coordinated campaign over several months to woo its staff and clients.

Earlier this month, UBS won the first round of the bitterly contested legal battle when the High Court imposed an injunction barring Vestra from poaching more UBS staff or clients. Mr Justice Openshaw ruled that UBS had presented “formidable” evidence of an unlawful conspiracy.

Last week, Vestra suffered a further blow when one of the alleged leaders of the breakaway group, David Guild, withdrew his resignation and decided to stay at UBS.

In spite of its legal troubles, Vestra opened for business as planned on August 1. A spokesman said that it had received an “exciting” number of enquiries from prospective clients not connected to UBS.

For UBS, the victory is mixed. Although it has succeeded in preventing Vestra gaining an unfair start-up advantage, the case brought further unwanted publicity for the beleaguered bank, which has announced billions of dollars in write-downs since the credit crisis began last summer.

During the hearing, Vestra presented 40 letters and e-mails from departing UBS employees that showed the level of discontent at the UK wealth management arm since it was acquired from Laing & Cruikshank in 2004. The letters detailed complaints of mismanagement and bureaucracy and expressed unease over rumours that UBS was attempting to unload the division to Barclays.

UBS has sought to rebuild its UK wealth management arm since the Vestra defections, hiring 40 new staff including replacing all 18 departed client advisers.

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