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Broker Protocol and Non-Protocol Litigation

Financial industry professionals seeking to move firms benefit from experienced attorneys to help them navigate through the change in employment. There are many issues that arise in the process that require careful planning and seasoned legal advice. Over many years RIK has successfully advised a number of advisors and other financial professionals in transitions, many of them top Wall Street executives and producers. We have relationships with key recruiters and are completely independent of the firms we negotiate with on behalf of advisors. We have successfully transitioned advisors to wirehouses and other firms across the country.

RIK attorneys know the relevant contract terms in the industry and help devise negotiation strategies that protect and maximize our clients’ interests. We are well versed in the securities industry and fully familiar with regulatory issues. We are particularly attuned to addressing thorny issues that arise in advisor transitions relating to non-solicitation of clients and fellow employees, and properly managing the use of proprietary, trade secret or other confidential information. We counsel advisors on how to avoid the many legal pitfalls that can trigger unwanted litigation.

In particular, we counsel transitioning advisers regarding the “Protocol for Broker Recruiting” (the “Protocol”) which established procedures for allowing advisors to switch firms and bring their clients with them. Although some large wirehouses (UBS, Morgan Stanley, Citigroup) recently left the Protocol, it is still applicable to a large number of other firms. The Protocol protects such advisors from legal liability to their old firm for soliciting clients and using certain client information such as client name, address, phone number, email address, and account title, provided the  Protocol is followed.

RIK attorneys advise their clients on how to plan their transition to comply with the Protocol so as to avoid litigation with their old firm. We become part of the transition team, providing timely and knowledgeable advice throughout the process. If litigation can’t be avoided we have extensive experience in court and arbitration and representing industry professionals in employment disputes. 

RIK attorneys also have extensive experience negotiating contracts with the new firm. We are knowledgeable about contract terms to seek and those to avoid or modify in such negotiations, including issues relating to promissory notes, deferred compensation, severance and other benefits.

A non-Protocol transition needs to be handled differently. Unlike a typical Protocol move, advisors have to seriously budget for possible court litigation, in which their old firm would seek to obtain an order precluding them from solicitation of clients and from using or removing client records or information. Generally speaking, under the Protocol advisors are allowed to take client lists containing certain limited information and to solicit these clients once they move to their new firm. Without the Protocol, a major legal factor governing transitions will be the advisors’ agreements with their old firm, which often broadly restrict solicitation of clients and other firm employees, and the use or removal of client or firm confidential information. There is also legal precedent imposing liability under common law and state statutes for conduct constituting unfair completion and theft of trade secrets.

Such court litigation, while often of short duration, is expensive. It requires the parties to appear for an evidentiary hearing before a judge on a expedited schedule usually not much longer than a couple of months. This means the lawyers typically work almost around the clock to be prepared for the hearing. After resolution of the court proceeding, the dispute may continue in FINRA arbitration. 

Advisors are wise to include on the transition team qualified and experienced lawyers, and seek their advice every step of the way, from the planning stage to the onboarding of clients at  the new firm. This is crucial because there are major legal pitfalls that can be avoided by careful planning and execution. For example, it is important that the advisor not engage in any oral or written communications (by text, email or otherwise) with clients that could be construed as solicitation, either before or after the advisor moves, until the client initiates contact with the advisor at the new firm. It should be remembered that sending emails from a personal email address but using a firm computer makes them accessible to the firm. The new firm should be notified of and approve client communications. 

The above is a sample of some of the legal issues that can arise in post or non-Protocol moves. However, with proper planning and legal counsel, advisors can minimize the chance their move will precipitate unwanted litigation.
Client Reviews
Daniel Katz and his firm are exceptionally knowledgeable about the constantly changing construction business and they have given my company insightful legal advice throughout the years. They have assisted with numerous construction negotiations, claims, and business matters with many satisfactory resolutions. Michael B.
Daniel Katz and his team have always been exemplary, always prepared, always responsive and extremely knowledgeable about construction issues. I cannot imagine better representation. Jim F.
RIK fought hard for me in my FINRA arbitration which resulted in an outstanding result. I will forever be grateful to them. Jeff B.
Ross and his team did a wonderful job representing me in my employment dispute. They were honest, intelligent and hard working. I recommend RIK to all of my colleagues in the financial industry. Steven F.
The theft of pension fund assets by a money manager prompted the Board of Trustee’s investigation into “how did this happen?” John Rich and the Rich, Intelisano & Katz team managed this complex securities litigation matter to fruitful results for our pension fund. Cecelia C., Executive Director