HighTower Advisors LLC chief Elliot Weissbluth last week shrugged off a “lift-out” lawsuit filed against the firm last month 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,” he 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 affiliated with Morgan Stanley. The suit also alleges that the partners at Strata, an advisory group that manages $500 million in assets, took confidential information with them when they left Morgan Stanley on Feb. 12.
It is 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 ordered a hearing for last week but has already denied certain Morgan Stanley claims. Nothing of significance came out of that hearing, according to HighTower spokeswoman Carol Graumann.
The temporary restraining order that Ms. Billings signed calls only for the defendants to refrain from using confidential information — not from soliciting Morgan Stanley clients.
Mr. Weissbluth said that HighTower, which was formed in 2008 and 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 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. “We are members of the protocol, and we follow the protocol very carefully.”
Morgan Stanley said that it filed the lawsuit against the Strata advisers to prevent “irreparable harm” from their " “egregious conduct in violating their contractual commitments and fiduciary duties to Morgan Stanley Smith Barney,” a firm representative wrote in an e-mail.
The firm 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 last month.
“The matter has been resolved,” Melissa Daly, a
Goldman Sachs spokeswoman, said last week, declining to elaborate.
E-mail Hilary Johnson at [email protected].
