Judge Bars Broker from Soliciting Former Morgan Stanley Clients
A federal judge on Wednesday ordered a former Morgan Stanley broker to immediately stop soliciting clients he had inherited as part of a retired colleague’s transition agreement.The decision was issued one day after Morgan Stanley sought an injunction and temporary restraining order against David J. Sayler, who had left the firm’s Medford, Oregon, branch last month to join a UBS Wealth Management USA branch in the same city.
The order requires Sayler to return within 24 hours any documents or client information he may have removed from Morgan Stanley, and to cease “directly or indirectly” soliciting any customer subject to the agreement he made with the retiring broker.
Since leaving the Protocol for Broker Recruiting 19 months ago, Morgan Stanley has selectively sought court orders against advisors who allegedly violated employment agreements and privacy laws by taking contact information and soliciting clients. It has simultaneously filed complaints seeking monetary damages and permanent injunctions against the brokers in Finra arbitration panels, as it has done with Sayler.
District of Oregon Judge Ann Aiken’s quick decision to issue a temporary restraining order, which she termed an ”extraordinary remedy” under federal law, reflects the unusual circumstances of the case, lawyers said. The broker was allegedly violating terms of Morgan Stanley’s “Former Advisor Program” that he signed with the firm and the older broker in 2017.
“The argument appears to be that these are not accounts that the advisor generated, but were given to him by the retiring broker,” said Thomas B. Lewis, an employment lawyer at Stevens & Lee in Princeton, N.J., who is not involved in the case. “It’s easy for judges to say they’re going to issue a TRO when brokers go after accounts that are subject to an agreement.”
Morgan Stanley, like other large brokerage firms, has been enhancing the benefits that “sunsetting” older brokers can receive as they transition into retirement in order to keep their clients in-house and is aggressively protecting the programs.
“It’s effectively sending a message to all of their advisors that if you leave and reach out to the retirement program accounts, they’re going to get aggressive,” Lewis said. “Morgan Stanley is not alone in that.”
Sayler did not return a request for comment, and a spokesman for UBS, which was not named as a defendant, declined to comment.
Sayler—who has been a broker for 12 years—had been encouraging customers in phone calls and in-person meetings before and after he resigned to transition their assets to UBS, Morgan Stanley said in its court complaint. It accused him of pre-soliciting clients with a mass mailing that said: “I enjoy working with you and look forward to the years to come.”
The firm would never have approved such mailings if it had known that “those years to come would be years spent working at another financial firm,” it said.
Morgan Stanley effectively argued that Sayler’s actions could inflict “irreparable injury stemming from the threatened loss of customer goodwill and client relationships,” the judge’s order said.
Sayler is not prohibited from returning phone calls from clients who contact him or from processing account transfer requests.
The TRO victory is the second for Morgan Stanley in two weeks, following a restraining order that a Maryland judge had issued. However, attempts to curb former brokers’ client solicitations through litigation remain relatively rare, according to Lewis.
“If the advisor is doing a simple announcement and playing by the industry rules, for the most part there is not any contentiousness or aggressiveness,” he said, “including Morgan Stanley.”
A Morgan Stanley spokeswoman declined to comment.
Judge Aiken scheduled a July 19th hearing to resolve the status of the restraining order and injunction.