Edward Jones Wins TRO Against Ameriprise Broker

Edward Jones notched a win in its campaign to keep brokers from soliciting former clients in the initial days of setting up a practice with a new broker-dealer.

A federal district judge in South Carolina last week enjoined George Heyward Barnes, who began his brokerage career five years ago at a Jones office in Aiken, SC, from asking his former firm’s customers to follow him to an independent brokerage office affiliated with Ameriprise Financial.

In the month since resigning from Jones in late September, Barnes convinced clients to transfer about $11 million for him to manage at Ameriprise through outreach that included sending account-transfer packets, according to Edward Jones testimony that Judge J. Michelle Childs cited in issuing the three-week restraining order last Friday.

Barnes, who did not return a request for comment, attested that he “merely informed his former clients that he had left the company,” the order said, sending transfer documents only to clients who asked to continue a relationship they had built with him at Jones. Many had previously worked with him when he was practicing as a certified public accountant, he testified.

“Defendant is correct that simply announcing one’s transition from one firm to another, without any other action, does not constitute a solicitation under Missouri law,” the judge wrote, citing Jones’ home state. “However, [he] did more than just ‘provide contact information to clients.’ He contacted specific clients to schedule appointments. He explicitly asked at least one client to move their account to Ameriprise. He sent paperwork smattered with references to transferring accounts to a slew of clients.”

Jones and other firms in the past year have had mixed success in obtaining temporary restraining orders that accuse brokers of violating employment contracts, privacy regulations and trade secret laws by reaching out to customers when they leave.

A  judge last year denied Jones’ request for a TRO against an Indiana broker who set up an independent practice, noting that disclosing his move was not only legal but consistent with Jones’s own notices to clients and protective of customer rights.

A federal judge in Oregon reversed a nonsolicit order issued last year against a former Morgan Stanley broker, determining that the firm could not prove it would suffer “immediate and irreparable injury,”  one of the legal standards required for TROs, over the departure of a single broker.  But a Virginia judge three months ago granted Jones another request for a TRO against a broker who had left for Ameriprise.

Jones and other brokerage firms accompany courthouse requests for TROs with filings for permanent relief and damages through a Financial Industry Regulatory Authority arbitration forum.

“Edward Jones takes very seriously its responsibility to protect client data, and in this case, Mr. Barnes misappropriated that data in order to solicit clients,” a company spokesman said in an e-mail. “We expect moving forward that Mr. Barnes will comply with the court’s order and honor the non-solicitation provisions of his employment agreement with our firm.”

The strategy of asking courts to quickly handcuff brokers from moving client assets in the early days of new affiliations had been common at big firms such as Merrill Lynch prior to the signing of the Protocol for Broker Recruiting in 2004. It continues to be pursued by firms such as Jones, Charles Schwab, Fidelity Brokerage Services and bank-branch-based broker-dealers that generally work with less affluent clients than do wirehouse and “boutique firm” advisors.

Morgan Stanley, which dropped out of the Protocol two years ago, occasionally pursues the strategy.