Financial adviser David Kinnear and his partner Kathleen Bakas may have to present their computers and cellphones to the Cook County Circuit Court for inspection and “scrubbing” — if their former employer gets its way.
The two former
UBS AG financial advisers, who generated more than $3.7 million in revenue over the last 12 months, allegedly crossed a line they shouldn't have when they jumped ship to
Wells Fargo Advisors LLC this week.
In an unusual filing in the Cook County Circuit Court in Chicago on Feb. 15,
UBS asked the court for an injunction against the two advisers pending an expedited arbitration hearing by the
Financial Industry Regulatory Authority Inc.
UBS is asking the court to take a number of actions. The company wants the judge in the case to bar the two advisers from soliciting their
UBS clients to join them at
Wells Fargo.
UBS also is looking to prevent the pair from using or disclosing any information on
UBS clients. In addition, the Swiss company wants the court to order the defendants to return any
UBS client records or copies of records they currently possess and to destroy any computerized client records they have.
Indeed,
UBS has requested that the pair make their computers, cellphones and tablets available for “scrubbing and/or cleansing” of any proprietary
UBS information.
Lawsuits filed against departing advisers were routine prior to 2004. But with the drafting of the Protocol for Broker Recruiting that year, such actions have become rare. “In general, the frivolous claims have gone away because everybody recruits everyone else's advisers,” said one recruiter, who asked to remain anonymous.
The protocol, which 795 firms have now signed, spells out what information advisers can and can't take with them when they leave one firm for another. Advisers are allowed to take a client's name, address, phone number, e-mail address and the title of the account. They are “prohibited from taking any other documents or information.” Advisers are also not allowed to solicit any clients to join them at a new firm before they have left their previous employer.
Wells Fargo & Co. signed on to the protocol in 2006.
UBS, along with Smith Barney and Merrill Lynch, was one of the three founding signatories of the agreement.
"
UBS greatly respects the relationship between financial advisers and their clients, but we strongly believe that these particular advisers violated their duty of loyalty to the firm by breaching our policies on the protection of proprietary client data,"
UBS spokeswoman Karina Byrne wrote in an e-mailed statement.
Specifically, the firm alleges that Mr. Kinnear on multiple occasions downloaded confidential client information and is now using it to solicit his former
UBS clients. The information, according to the complaint, includes “year-end statements, performance reports of each client's investments and other personal financial goals for each client.”
UBS also contends that Mr. Kinnear still owes the firm some of more than $650,000 in loans made to him as part of a
UBS incentive program and that he has violated a client non-solicit agreement that was part of the incentive program. The firm seems particularly incensed by an e-mail Mr. Kinnear allegedly sent Feb. 7 “disparaging
UBS to
UBS clients that Kinnear serviced and also to
UBS clients serviced by other
UBS financial advisers.” The e-mail, according to the complaint, was sent to “approximately 1,000 individuals.”
UBS alleges similar violations by Ms. Bakas.
The size and success of the adviser team may be a factor in the dispute, suggested Ron Edde, a recruiter with Armstrong Financial Group Inc. “With a team this size, if they took one shred of data they weren't supposed to, it increases the likelihood of legal action, if only to discourage others from leaving,” Mr. Edde said.
The court has not yet set a date for a hearing on the case. Mr. Kinnear declined to comment on the situation, and Ms. Bakas could not be reached for comment.
