Merrill Broker Sued by Fidelity Agrees to Stop Client Solicitation
Fidelity Brokerage Services has withdrawn a lawsuit seeking to enjoin Merrill Lynch and an advisor it hired in June from calling his former clients following a stipulation in which he agreed to a solicitation ban until next June.
The parties agreed to continue their dispute in Finra arbitration, but Fidelity dropped its request for expedited arbitration hearings now that a judge has accepted the stipulated injunction on soliciting clients.
Fidelity had asked a federal judge in Atlanta last Thursday to issue a temporary restraining order prohibiting him from reaching out to its clients after at least five allegedly reported that they had heard from him in violation of a one-year solicitation ban in his employment contract.
The stipulated permanent injunction the judge approved the following day prohibits Dolar and Merrill from initiating any conduct with the Fidelity clients through next June 15 and to return any information he may possess about customers and prospects.
Filings for temporary restraining orders by discount brokers such as Fidelity and Charles Schwab that are not members of the Protocol for Broker Recruiting proliferated in the past year, but they have been relatively rare since the pandemic has constrained work, courtroom and arbitration routines.
“Some courts are not very willing to entertain business disputes right now in the current crisis,” said James Heavey, a securities lawyer at New York-based Barton LLP, who is not involved in the case. “It certainly doesn’t surprise me in the current state of affairs that the parties have come together and consented to an injunctive order that they can both live with in order to simply litigate and defer litigation costs until the arbitration would be held in Finra,”
Dolar and spokespeople from Merrill and Fidelity declined to comment.
The stipulated permanent injunction prohibits the parties from informing Fidelity clients that either of them have been “ordered by a federal court or by Finra to behave in any certain way.” Instead, “any communication about this Order to Fidelity Clients shall state merely that the parties have reached agreement as to the matters herein,” it says.
As is typical of non-solicitation actions from discount brokerage firms, Fidelity alleged that Dolar was dependent on its reputation and on referrals from call centers for building his book unlike advisors at full-service firms who cold-called.
Roy Harold Meeks, Jr., a lawyer representing Merrill, confirmed in an e-mail that the Finra arbitration complaint filed concurrently with the lawsuit seeking a permanent injunction and damages is pending.
St. Louis-based Edward Jones last week sought a restraining order against a Virginia broker who left in late June to join Ameriprise Financial’s independent channel. Jones alleged that advisor Samuel “Ed” Clyburn, Jr. took advantage of pandemic-induced work-from-home arrangement to copy confidential client information and an office move in February to mislead clients about which firm he was working for.
—Mason Braswell contributed to this story.