Oct. 29 (Bloomberg) -- Rohit D’Souza, a former Merrill Lynch & Co. executive hired a year ago by Citadel Investment Group LLC to build an investment bank and brokerage, is leaving the $14 billion hedge-fund firm.

D’Souza’s departure date hasn’t been set, Katie Spring, a spokeswoman for the Chicago-based firm, said in a telephone interview today. Patrik Edsparr, who is Citadel’s global head of fixed income and oversees its European business, will take over the securities unit, Spring said.

The change may set back Citadel’s efforts to create a firm that can rival Goldman Sachs Group Inc. and Morgan Stanley. In his 12 months at the firm, D’Souza hired more than 80 bankers, sales representatives and traders to create a securities firm and fill a void left by last year’s collapse of Bear Stearns Cos. and Lehman Brothers Holdings Inc.

“His stepping down raises the question for clients about the stability of Citadel’s securities business,” says Jason Kennedy, chief executive officer of Kennedy Associates, a London-based executive search firm, whose clients include hedge funds. “Rohit has a successful track record of turning around and building businesses. He’s not a quitter.”

Former colleagues say D’Souza is methodical and doesn’t make snap decisions. Those traits may have led to friction with Chief Executive Officer Ken Griffin, who can be impatient and quickly lose confidence in individuals he once thought integral to the firm, according to people who know the men.

Losing Executives

At least six senior executives have left Citadel since the beginning of 2008, including Mikhail Malyshev, the firm’s former global head of high-frequency trading who helped make $1 billion last year when Citadel’s biggest funds lost 55 percent.

Joe Russell, head of U.S. fundamental credit, Matt Andresen, who was co-head of Citadel’s derivatives group, and Jason Lehman, who was ran Citadel’s global options business, also left.

In a letter to employees announcing the changes, Griffin said that D’Souza was hired to help build the securities firm, and had achieved his mandate of hiring people and starting its core businesses.

Griffin, 41, approached D’Souza in May 2008, a month after he quit Merrill. The Mumbai native had spent four years at what was once the world’s largest brokerage, where he ran its global equity-trading business. There he oversaw the modernization of the firm’s automated-trading systems and added a propriety trading desk. In 2007, his division made the most revenue, a record $8.29 billion, within Merrill’s investment bank.

Merrill Hire

D’Souza left the firm in April 2008 after a rift with then Chief Executive Officer John Thain who had planned to install another senior trading executive over him. Before Merrill, D’Souza was at Morgan Stanley for eight years, where he ran its North American equity trading business. He previously worked for Investment Technology Group, a brokerage and financial technology firm in New York.

Edsparr, 43, joined Citadel in 2008 from JPMorgan Chase & Co., where he worked for twelve years, most recently as global head of proprietary trading and principal investments.

To contact the reporters on this story: Saijel Kishan in New York at skishan@bloomberg.net; Katherine Burton in New York at kburton@bloomberg.net; Bradley Keoun in New York at bkeoun@bloomberg.net

Last Updated: October 29, 2009 15:28 EDT