Ex-Credit Suisse brokers sued over alleged theft of client data

Two advisers who had $3.5 million in production took confidential information when they moved to J.P. Morgan Securities, suit alleges

Jun 30, 2014 @ 1:25 pm

By Mason Braswell

A lawsuit brought by Credit Suisse Securities against two of its former financial advisers highlights the legal hurdles brokers continue to face when moving to a new firm, even when they think they have followed the right steps.

Judge Carol Edmead in the New York State Supreme Court in Manhattan granted a limited temporary restraining order against two brokers after Credit Suisse accused them of violating their non-solicitation agreements.

The two, David Starker and John Delehanty, allegedly took client lists and e-mailed confidential documents to their personal accounts in advance of their move to J.P. Morgan Securities, the boutique wealth management arm of JPMorgan Chase Bank NA, according to the suit.

“Respondents engaged in a concerted effort to misappropriate Credit Suisse confidential, proprietary and trade secret information in order to use it to unfairly compete against Credit Suisse in their new positions at JPMorgan,” the firm said in its petition.

Credit Suisse also filed a claim for damages with the Financial Industry Regulatory Authority Inc. The firm did not specify a dollar amount, but said that the two brokers oversaw relationships that generated some $3.5 million in annual revenue last year.

At issue was a list of around 3,000 contact names that Mr. Starker allegedly sent to his personal e-mail account from his Credit Suisse work e-mail before he moved in May. The list contained names and “voluminous” notes about prospective clients, the firm said. Mr. Delehanty, who left in March, had also sent some confidential client relationship reports to his personal e-mail account, the firm said.

Both firms are signees to the Protocol for Broker Recruiting, but Credit Suisse said that the e-mails invalidated the protocol's protections.

The protocol, which approximately 1,100 brokerage firms have signed, protects a broker from litigation provided that they take only a spreadsheet containing certain client information, such as names and phone numbers.

Brokers frequently send additional information to themselves ahead of time in order to prepare a compliant spreadsheet or work from home, but they must return or destroy those documents before the date of the move, according to Liam O'Brien, who focuses on employment litigation at McCormick and O'Brien.

“They e-mail themselves data or download data or print data, all of which is ascertainable through an audit of the technology to see what data has been downloaded or e-mailed or printed out,” Mr. O'Brien said. While that is a violation, depending on the data, he said, that violation can be undone if they return the data at the time of their resignation.

Mr. Starker and Mr. Delehanty did not respond to requests from Credit Suisse to comply with the protocol after their move, according to the firm's petition.

Thomas B. Lewis, an attorney with Stevens & Lee, said the case will likely be about proving that any documents that they had sent were destroyed or left with the firm in accordance with the protocol.

“If these individuals can prove that they don't have confidential information, this case will end very quickly,” Mr. Lewis said.

Providing some hope for the respondents, Ms. Edmead denied portions of Credit Suisse's request, including a requests for a return of the documents, a deposition and expedited discovery.

Mr. Lewis said that lawsuits like this can sometimes be used to send a message.

“There's a couple reasons why companies file a lawsuit like this,” he said. “For all we know, Credit Suisse might have filed this action to send a message to JPMorgan, which is, 'Stay away from our employees.' ”

A spokeswoman for Credit Suisse, Nicole Sharp, declined to comment.

Leonard Weintraub, the attorney representing both brokers in the case, referred a request for comment to J.P. Morgan Securities spokesman Darin Oduyoye. Mr. Oduyoye declined to comment.

0
Comments

What do you think?

View comments

Recommended for you

Sponsored financial news

B-D Data Center

Use InvestmentNews' B-D Data Center to find exclusive information and intelligence about the independent broker-dealer industry.

Rank Broker-dealers by

Does your pay stack up?

The Adviser Research Dashboard

Based on data collected through InvestmentNews' annual adviser research studies, this interactive, customizable tool allows you to view detailed data on compensation, staffing and financial performance practices from across the industry.

Learn more »

Upcoming Event

Apr 30

Conference

Retirement Income Summit

Join InvestmentNews at the 12th annual Retirement Income Summit - the industry's premier retirement planning conference.Much has changed - and much remains to be learned. Attend and discuss how the future is full of opportunity for ... Learn more

Featured video

INTV

Advisers beware: tax law has unintended consequences

Commission accounts could be preferable for some clients, and advisers could be incentivized to move from employee broker-dealers to independent channels.

Recommended Video

Path to growth

Latest news & opinion

Cutting through the red tape of adviser regulation is tricky

Don't expect a simple rollback of rules under the Trump administration in 2018 — instead, regulators are on pace to bolster financial adviser oversight.

Bond investors have more to worry about than a government shutdown

Inflation worries, international rates pushing Treasuries yields higher.

State measures to prevent elder financial abuse gaining steam

A growing number of states are looking to pass rules preventing exploitation of seniors.

Morgan Stanley's wealth management fees climb to all-time high

Improvement reflect firm's shift of more clients into fee-based accounts priced on asset levels, which boosts results as markets rise.

Legislation would make it harder for investors to sue mutual funds over high fees

A plaintiff would have to state in their initial complaint why fiduciary duty was breached, and then prove the violation with 'clear and convincing evidence.'

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print