Ex-Morgan Stanley, UBS advisers prevail in TRO claims

The key to whether exiting brokers can beat temporary restraining orders from wirehouses is how they handle client information

Mar 2, 2018 @ 2:48 pm

By Bruce Kelly

Some financial advisers at Morgan Stanley and UBS Financial Services may be scared stiff of being sued if they leave their firms to move to another broker-dealer.

That's because both wirehouses decided toward the end of last year to exit an agreement among competitors known as the protocol for broker recruiting; the pact allows an adviser to carry a limited amount of client information with him when he leaves his old firm for a new employer.

The legal fight is about who controls the client: the adviser or the firm. Both Morgan Stanley and UBS said last year that they would once again enforce portions of work contracts that restricted advisers contacting clients after they resigned.

So far, Morgan Stanley has filed at least four temporary restraining orders in federal courts against former brokers and been successful in those actions.

But three recent court cases, two this week and one from January, show that, for advisers thinking of leaving Morgan Stanley and UBS, they are able to move to a new employer, face a lawsuit and ultimately prevail in court.

The key issue is how advisers handle confidential client information, one attorney said.

"Morgan Stanley and UBS' abrupt exit from the broker protocol gave them an immediate tactical advantage to obtain restraining orders against the departing brokers," said Brandon Reif, an industry attorney. "But the brokers and their recruiting firms are becoming more careful in the departure process to better protect client data. This strategy will lead to less restraining orders."

On Wednesday, Morgan Stanley withdrew its motion for a TRO against a seven-person team lead by adviser Patrick O'Neill.

Mr. O'Neill and his team moved to Raymond James Financial Services Inc. on Feb. 16, according to his BrokerCheck profile. He had worked at Morgan Stanley for almost ten years.

Morgan Stanley filed its complaint in U.S. District Court for the Eastern district of Michigan on Feb. 21, alleging that the group misappropriated trade secrets pertaining to Morgan Stanley clients. It also claimed that the team had "carried out boxes of property belonging to Morgan Stanley" and "removed physical client files pertaining to Morgan Stanley clients."

Mr. O'Neill's practice in Farmington Hills, Mich., called the Family Legacy Group, had more than $336 million in client assets and generated nearly $3 million in commissions and fees over the past year, according to Morgan Stanley's complaint.

Mr. O'Neill and his team then filed affidavits saying that they had not taken any trade secrets, according to court papers from Monday, and Morgan Stanley then withdrew its motion for TRO.

"At the end of the day, a TRO sounds horrific," said David Gehn, a partner with Ellenoff Grossman & Schole, who represented Mr. O'Neill and his team. "No one wants to be the subject of a court order. But what it means for the adviser is, in plain English, follow your contract."

A spokeswoman for Morgan Stanley, Christine Jockle, said the firm declined to comment.

UBS recently saw two motions for TROs against former advisers denied in state courts.

One former UBS adviser, Gregory Rice, moved to Raymond James & Associates on Jan. 10, according to his BrokerCheck report. UBS then filed a TRO in Idaho state court to enforce non-solicitation and non-disclosure provisions of Mr. Rice's work agreement. That TRO was denied, in part, "because there are many reasons clients might transfer to Raymond James without Mr. Rice" violating the work agreement, according to the court order by District Judge Peter G. Barton.

Richard L. Bean, a UBS broker who jumped to Ameriprise Financial Services in mid-February, prevailed earlier this week when a North Carolina state judge denied UBS' attempt to have a TRO imposed on Mr. Bean's efforts to contact clients, according to a report on industry website AdvisorHub.

A UBS spokesman, Peter Stack, declined to comment about the bank's failing to get injunctions against its former brokers.


What do you think?

View comments

Recommended for you

Upcoming Event

Mar 14



InvestmentNews is honoring female financial advisers and industry executives who are distinguished leaders at their firms. These women have advanced the business of providing advice through their passion, creativity, inclusive approach and... Learn more

Featured video


Where in the U.S. are RIAs growing the fastest?

InvestmentNews' deputy editor Robert Hordt talks to senior columnist Jeff Benjamin about his report on how registered investment advisers are faring in different regions of the country.

Latest news & opinion

Midwestern magic? RIA assets soared nearly 30% there last year

Theories for what's driving the growth spurt abound, but it surpassed all other regions of the country.

8 apps advisers love for getting stuff done

We reached out to advisers to find out which apps they are using to run their business more efficiently.

10 tax moves to squeeze in before the year ends

Here are some tax moves clients can still make before year-end.

Richard Neal: the new face driving retirement policy in Washington

As he becomes head of the House Ways and Means Committee, Rep. Richard Neal (D-Mass.) is poised to make some big changes.


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.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print