Securities Industry Attorney for Broker-Dealer Recruiting Disputes in McHenry County

Protocol Disputes Lawyer Serving Illinois

When brokers and financial advisors move from one firm to another, there are often legal issues that must be resolved. For example, the firm and the advisor typically have a restrictive covenant in the employment agreement that prevents advisors from taking confidential information to their new firm. There is also a "Protocol" that governs broker-dealer recruiting and lays out what is permissible (and what is not) when brokers and advisors transfer firms. Some aspects of the Protocol on Broker-Dealer Recruiting are not totally clear, however, and disputes over these issues can often end up in litigation. When this occurs, it is important to seek the guidance of a skilled securities litigation attorney, so your rights and interests are protected.

At Owens Law, LLC we have experience with securities litigation and FINRA arbitration. Our attorney has extensive knowledge of the Protocol on Broker-Dealer Recruiting and the common issues that arise when a wealth advisor moves from one brokerage firm to another. In fact, we are one of the few firms in the northern Chicago suburbs that handle this area of the law. Our approach is aggressive and meticulous, and we put our in-depth experience to work to explore all potential legal avenues toward a favorable resolution.

What is the Protocol on Broker-Dealer Recruiting?

In 2004, some of the largest brokerage firms in the country got together to form an agreement designed to reduce litigation and ensure there would be smooth transitions when a broker or wealth advisor moved from one firm to another. The agreement is known as the Protocol on Broker-Dealer Recruiting (a.k.a. the Protocol), and its original signatories were Merrill Lynch, Citigroup, and UBS. Today, the Protocol has over 1000 firms that are signatories.

Under the Protocol, wealth advisors are allowed to take the following information about their clients with them when they move to a new firm:

• Names
• Addresses
• Phone Numbers
• Email Addresses
• Account Titles

Wealth advisors are NOT allowed to take any additional information or documents, nor are they allowed to inform their clients before terminating employment that they are moving to a new firm.

Common Protocol on Broker-Dealer Recruiting Disputes

Many brokers and advisors are under the mistaken impression that the Protocol fully protects them from legal exposure when they move to a new firm. However, there are several potential legal landmines that can lead to a dispute, some of the most common include:

• Moving to a Non-Protocol Firm: Though the Protocol has numerous signatories, there are many firms that are non-members. In addition, this is not always as "cut and dry" as it seems. For example, an advisor may go to work for a firm that is an affiliate or subsidiary of a larger brokerage. Though the parent company may be a signatory, the subsidiary or affiliate may not. When wealth advisors move to non-Protocol firms, they are not afforded any of the legal protections laid out in the Protocol.
• Client Ownership: It is not always clear which clients belong to the advisor, and which belong to the firm. For example, if an advisor has 50 clients, 40 may have been obtained through his/her own efforts, and the other ten may have been provided by the firm. In such cases, brokerages sometimes maintain that the advisor is only entitled to take the allowed information of the clients obtained on their own.
• Poaching and Raiding Claims: Under the Protocol, firms are generally allowed to recruit wealth advisors from other Protocol-member firms. However, the agreement is vague on what level of recruiting is considered acceptable. For example, recruiting one or two brokers may be within the parameters of the Protocol, but recruiting an entire office might be considered poaching or raiding.
• Failure to Repay Debt: There are times when wealth advisors leave to join a new firm but still owe money to their old employer. Examples include signing bonuses in exchange for agreements to remain with the firm for a specified period. If the advisor moves from one Protocol firm to another, they may be legally protected as long as they follow the terms and conditions of the Protocol. However, the Protocol does not absolve them of debt owed to the firm from which they departed, which could compel an action by the firm for breach of promissory note.

The Protocol is an agreement that, although it provides various forms of protection for wealth advisors that change firms, still has many potential areas of legal exposure. At Owens Law, LLC, we are well-versed in the specifics of the Protocol and its legal ramifications for brokerage firms and wealth advisors. For skilled guidance on Protocol on Broker-Dealer Recruiting disputes in Illinois, contact our office today at 847-854-8700. We serve clients in the northern Chicago suburbs and throughout the state of Illinois.