Morgan Stanley Wealth Management claims a former broker who joined another firm came up with an unusual way to hold onto his clients — he went into the firm's computer system a few days before he left and changed their telephone numbers.
In a lawsuit, Morgan Stanley alleges that the broker, John McCallion, who now works for
Ameriprise Financial Services Inc., was trying to prevent the wirehouse from contacting his clients to retain their business. In some cases, the numbers were off by one digit “apparently to make the changes less obvious,” according to the complaint.
Morgan Stanley also claims Mr. McCallion provided a separate list of his clients' information to Morgan Stanley as required, but he did so on a USB drive that could not be opened on the branch's computers due to security reasons.
Mr. McCallion agreed to a temporary restraining order in U.S. District Court for the Northern District of Illinois temporarily blocking him from soliciting clients. The broker is also facing a Finra arbitration claim.
“Mr. McCallion had received account reassignments when other financial advisers left in the past, so he knew that Morgan Stanley's computer system generates an account redistribution report with the customers' telephone numbers from Morgan Stanley's records,” the firm argued in its complaint. “These changes (combined with [Mr.] McCallion leaving an inaccessible copy of the list he had taken) hampered Morgan Stanley's ability to reach its own customers.”
As a result, the firm argued that Mr. McCallion, who served some 900 clients, should not receive the benefits of the Protocol for Broker Recruiting, which allows brokers to take a list of certain client information when moving firms provided they also provide a copy of the list to their old firm.
Michael T. Roche of Schuyler Roche & Crisham, who is not involved in the case, said it was not uncommon for departing advisers to attempt to change phone numbers but that the practice was more dangerous now that firms can detect those changes.
“It's foolish because advisers are not going to get away with it in this day and age with cybersecurity and systems in place to track that kind of stuff,” he said. “And it's a big 'no-no' to access firm's internal computer systems and change phone numbers. It's never going to resonate well with a judge.”
The case will now go before an arbitration panel with the
Financial Industry Regulatory Authority Inc., which will decide whether to make the injunction permanent.
An attorney for Mr. McCallion, Scott Browdy of Ryan Law Firm, did not respond to a request for comment.
Mr. McCallion had initially argued against the temporary restraining order and denied that he had taken trade secrets or confidential lists.
“The order that [Morgan Stanley] requests here is driven by [Morgan Stanley]'s desire to punish [Mr.] McCallion and send him a 'message,'” he said in court filings. “That is not proper basis for an injunction.”
He argued that he did not take any information beyond what was allowed in the protocol, and there was “no allegation — and certainly no evidence — that [Mr.] McCallion himself is responsible for the purportedly changed telephone numbers.”
Mr. McCallion also said that he immediately offered to provide a new thumb drive when contacted by Morgan Stanley's attorney, but that Morgan Stanley was already able to access all the information by the next business day after Mr. McCallion resigned.
Mr. McCallion had been at Morgan Stanley and predecessor firms since 1995 in the firm's Naperville, Ill., office outside of Chicago.
