Ed Jones Bares Teeth Chasing Texan Who Jumped Ship
Edward Jones & Co. is keeping up the heat on brokers who leave its franchise of single-advisor offices.
The company won a temporary restraining order last month against Markos Pappas, a broker in Houston Heights, Texas, who had joined the firm in 2011 but left on February 3 and aggressively began contacting his former clients, according to charges Jones made in court papers filed in Harris County district court in Houston, Texas.
Jones, which ended last year with 14,919 brokers, is particularly sensitive to departures because its largely single-broker-per-office model leaves little opportunity for colleagues of a departing broker to solicit clients to remain.
Pappas showed little mercy in his appeal to clients to follow him to Investment Professionals Inc., the San Antonio-based independent broker-dealer that he joined, according to Jones.
“The reason I left was due to huge regulatory and industry changes,” he wrote in an email to a client that his former firm included in its court filings. “Edward Jones was not staying competitive with their pricing models. You are more than welcome to follow me and continue working together.”
Screenshots of text messages included in an affidavit filed with the court included one saying: “I just wanted to confirm with you that you would have the same investments, nothing would change but your fees would be about 1000 dollars cheaper a year,” he wrote in one.
As of February 23, $9.5 million in client assets had transferred to Pappas’ new firm, according to exhibits attached to the complaint.
A spokesman for Edward Jones said in an emailed statement that the protection of client information is “something we take very seriously.”
“We pursue claims against financial advisors who leave Edward Jones when we believe they have taken client information with them in violation of their contractual agreement with firm,” the spokesman wrote.
Pappas said he had been advised by his attorney not to comment on the case.
Edward Jones is not a signatory to the Protocol for Broker Recruiting, which allows brokers who move among the more than 1,500 participating Protocol firms to take certain client-contact information with them without threat of being sued. Investment Professionals was a signatory, but withdrew its registration in 2012.
Not all of Pappas’ appeals to former clients prior to the restraining order have worked.
“I’m happy with Edward Jones and I want to give them a chance,” an unidentified client wrote in one email included in court filings. “If they disappoint me then I’ll get with you and talk about options then.”
Jones charged Pappas with taking client lists and pre-soliciting them to transfer assets. It also said he trespassed by returning to his former Jones office the weekend after his resignation to take unspecified “items.”
“This is a case of employee disloyalty, misappropriation of confidential information and trade secrets and unfair competition,” Jones’ lawyers argued in the complaint, which was filed February 28.
The temporary restraining order expired earlier this month, but Jones refiled for a permanent restraining order and for a Financial Industry Regulatory Authority arbitration award. It said in court papers it is seeking at least $1 million in damages.