Former Morgan Stanley Broker in Illinois Agrees to TRO
Another former Morgan Stanley broker has accepted a temporary restraining order blocking him from soliciting former clients to join him at his new registered investment advisor, according to papers filed on Thursday in the Northern District of Illinois.
Morgan Stanley sought imposition of the order earlier this week against Steven Glazer, who resigned from the firm’s Deerfield, Illinois branch last Friday to join a small registered investment advisory firm. Lawyers for Morgan Stanley and Glazer signed the stipulated order prepared for Judge Virginia Kendall.
It is the third time in the five weeks since Morgan Stanley pulled out of the Protocol for Broker Recruiting that the firm has inhibited brokers trying to restart their practices at smaller firms by convincing judges to issue restraining orders. The firm has argued that the brokers took confidential information with them that was precluded by their employment agreements.
As in the two previous cases, the order allows the broker to respond to inbound client requests but requires him to maintain a log of the inquiries he receives.
While brokerage industry participants have been scrutinizing Morgan Stanley and its fellow Protocol dropout, UBS Financial Services, to see how aggressively they prosecute departing brokers, lawyers say none of the TROs to date present strong test cases. In each, brokers stipulated to facts about possessing customer information that would not have been allowed even if the Protocol were in effect, and in each case the brokers went to firms that were not Protocol signatories.
The Protocol permits brokers moving among signatory firms to take five rudimentary pieces of customer contact information with them. Brokers and lawyers say the true test of whether brokers can claim that client names belong to themselves rather than their former firms will come only when they can argue that they brought client names with them to the former firm because of Protocol protection and should be able to retain them when they move to a new Protocol firm.
“The argument in these cases is going to be: Is it really fundamentally fair to allow Morgan Stanley to have recruited advisors into the firm under the guise of the Protocol and now trap them at the firm by exiting,” said George Miller, a securities industry lawyer at Shustak Reynolds & Partners PC in San Diego who was not affiliated with the Glazer case.
Morgan Stanley, the biggest U.S. broker-dealer as measured by its 15,700 sales force, said it dropped out of the Protocol because competitors were “gaming” the pact so they could hire talent from the larger firm, which itself has cut its recruiting budget. Many of the brokers have joined smaller broker-dealers and advisory firms that may not have the resources to fight court and arbitration battles on behalf of their new hires.
Glenn Movish, the founder of Asset Management Group, the firm that Glazer joined, said in an interview on Tuesday that Morgan Stanley was attacking “the minnow” to send a message to larger brokers about what it would do if they tried moving to any sized firm.
Glazer, a six-year industry veteran, declined to comment on the TRO. He earlier told AdvisorHub that he had made a mistake by e-mailing himself a list of customers, and noted that he had been managing “more than $50 million in client assets,” a relatively small book, at Morgan Stanley.
Miller and other lawyers said they are not aware of UBS having filed for TROs since its Protocol exit earlier this month. UBS, which like Morgan Stanley and Merrill Lynch have halted recruiting efforts this year, employs fewer than 7,000 brokers.