Finra arbitrators award $475,000 to Morgan Stanley for broker who violated protocol
Kevin Michael Clouse left the wirehouse in February 2017, months before the firm pulled out of the protocol agreement.
Finra arbitrators awarded $475,000 to Morgan Stanley in a case involving a broker who the firm said violated an industry agreement to make it easier to move from one firm to another.
In an award handed down on Tuesday, the panel held that Kevin Michael Clouse violated his employment contract with Morgan Stanley as well as the Protocol for Broker Recuiting when he left the firm to join RBC Capital Markets.
Morgan Stanley alleged that Mr. Clouse immediately began soliciting his clients to move with him. The firm claimed that Mr. Clouse stole trade secrets and that his transition to RBC resulted in “intentional interference with contractual relations,” according to the award document.
The arbitrators ruled that Mr. Clouse and RBC were liable and must pay Morgan Stanley $311,000 in compensatory damages. Separately, Mr. Clouse must pay Morgan Stanley $164,000 in attorneys’ fees.
In addition to the monetary awards, Mr. Clouse and RBC must return to Morgan Stanley client information that Mr. Clouse took with him when he left that was not permitted by the protocol.
The case was filed on Feb. 14, 2017, several months before Morgan Stanley exited the protocol in October. Abandoning the industry agreement, which allows brokers to take certain client information with them to new firms, gives Morgan Stanley more leverage to prevent its registered representatives from departing.
After Morgan Stanley left the protocol, other brokerage firms also exited the agreement.
A spokeswoman for Morgan Stanley declined to comment. A lawyer representing Mr. Clouse and RBC was not immediately available for comment.
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