Speculation mounts on whether others will follow UBS' latest move to prevent brokers from leaving

UBS brokers must sign a 12-month non-solicit agreement if they want to get their 2017 bonuses

Feb 22, 2018 @ 2:24 pm

By Jeff Benjamin

UBS Financial Services, which followed Morgan Stanley to become the second wirehouse to exit the broker protocol late last year, has stepped up restrictions on brokers who might want to leave the firm, and experts are speculating if other broker-dealers might follow suit.

UBS is now requiring its nearly 7,000 brokers to sign an updated non-solicitation agreement, which is tied to the payment of bonus money earned in 2017, prohibiting them from contacting former clients for 12 months after leaving the wirehouse, according to published reports.

"It would be one thing if they decided to change the rules for 2018 bonuses, but changing the rules on something that has already been earned seems particularly egregious and just nasty," said Danny Sarch, an industry recruiter.

"This is adding more teeth to their exit from protocol," he added. "They've already locked the door, now they're creating the equivalent of a video surveillance system. Maybe next they'll put up an electric fence that shocks you if you try to leave."

In a conference call to brokers Thursday morning, UBS executives apologized for the timing of the non-solicitation agreement, which came to light just as brokers were expecting to start collecting last year's bonuses.

But even that response from UBS does not change the reality of the way the details were inserted into the latest non-solicitation agreement, according to Andrew Stoltmann, a securities attorney and president of the Public Investors Arbitration Bar Association.

"I think it's really sneaky," he said. "I haven't seen another wirehouse include something like that for brokers to sign," he said. "This is possibly the opening salvo in a war for clients. I'd be surprised if we didn't see a proliferation of these kinds of non-solicitation agreements now that this is out there."

Advisor Hub first reported UBS' move to require non-solict agreements. A UBS spokesman declined to comment.

Morgan Stanley declined to comment on whether it would follow UBS' lead. Citigroup Global Markets, the other firm that left the broker protocol agreement, could not immediately be reached for comment.

"It's just very sad, because it is taking us back to the dark ages of advisory services," said Adam Gana, a securities lawyer and managing partner at the law firm of Gana LLP.

More troubling to Mr. Gana is the potential "domino effect."

"If UBS tries it and is successful, it wouldn't' surprise me to see other firms follow," he added.

Unless UBS introduces some flexibility to the non-solicitation agreement, Mr. Gana said brokers' only recourse is to "get together and unequivocally say they won't sign an agreement requiring them to agree to that kind of non-solicitation."

It is worth noting that the non-solicitation agreement would only effect brokers who are planning to leave the wirehouse with the intention of taking some of their clients with them to a new firm.

Mr. Sarch, who called the latest agreement "far from standard," said UBS brokers have a few choices at this point.

"They can sign it and recognize that they are locked in," he said. "Or they can refuse to sign it, forgo the bonus, and take it to arbitration."


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