HighTower Advisors LLC chief Elliot Weissbluth today shrugged off a “lift-out” lawsuit filed against the firm late last week by Morgan Stanley Smith Barney, calling it baseless.
“It's clearly a failed attempt to intimidate, and a failed tactic to deter other financial advisers from leaving,” Mr. Weissbluth said. “Frankly, all it's effectively done is to confirm that these large firms now have to take HighTower seriously.”
In a suit filed Feb.16, Morgan Stanley accused Steven Ayer, Roman Ciosek, John Lang, Peter Lang and Jeffrey Sullivan — partners at Strata Wealth Management Group — of soliciting clients while they were still employed by Morgan Stanley. The suit also alleges that the partners at Stata, an advisory group in Rye, N.Y., that manages $500 million in assets, took confidential information with them when they left Morgan Stanley Feb. 12.
It's the first lift-out suit filed against HighTower. The term ‘lift-out' is used to describe the recruiting of a team of workers from another company.
New York state Supreme Court Justice Lucy Billings has ordered a hearing tomorrow, but has already denied certain Morgan Stanley claims. The temporary restraining order she signed calls only for the defendants to refrain from using confidential information — not from soliciting Morgan Stanley clients.
Mr. Weissbluth said HighTower, which has amassed $16 billion in assets by recruiting broker teams, is careful to follow the broker protocol. That agreement, which was signed by nearly 160 firms in the industry, allows allows advisers to take certain client information with them when they change firms.
“We follow the broker protocol with a high degree of discipline, and we did so in this case,” Mr. Weissbluth said. “The Strata lift-out was a protocol-compliant lift-out. We are members of the protocol and we follow the protocol very carefully.”
Morgan Stanley said it filed the lawsuit against its onetime workers to prevent “irreparable harm” from the former employees' “egregious conduct in violating their contractual commitments and fiduciary duties to Morgan Stanley Smith Barney," a firm representative wrote in an e-mail.
The bank has also filed an action with the
Financial Industry Regulatory Authority Inc. seeking injunctive and monetary recovery against both the Strata partners and HighTower. "Morgan Stanley Smith Barney has a strong case," the representative wrote. "It would not have filed it otherwise."
A similar suit was filed last week by The
Goldman Sachs Group Inc. against a team of brokers in Georgia who left for
Credit Suisse Group AG. Goldman dropped the suit late last week. “The matter has been resolved,” Melissa Daly, a
Goldman Sachs spokeswoman, said today. She declined to provide any other details.
