Morgan Stanley Broker Who Jumped to Wells Accedes to TRO
You don’t need a particularly large book of business these days to attract legal attention from a wirehouse eager to keep client assets.
In agreeing on July 3 to a stipulated TRO, Washington must refrain from soliciting his former clients until June 2020, or until a Financial Industry Regulatory Authority arbitration panel reaches a decision on the breach-of-employment-contract and damage claims Morgan Stanley has filed.
“When they take this proactive approach against smaller advisors, it has a stronger punitive effect on current advisors,” said James E. Heavey, a New York-based lawyer who is not involved in the Washington case. “It’s intended to show their determination to pursue advisors, no matter how big or small.”
A spokeswoman for Morgan Stanley, which has selectively pursued fleeing brokers with TRO filings since dropping out of the Protocol for Broker Recruiting in late 2017, did not immediately return requests for comment.
The firm’s wealth management executives have said they are increasingly focusing on retaining advisors servicing the very wealthy, noting that 82% of customer assets come from clients keeping $1 million or more with the company. But Morgan Stanley also has sought court orders against a range of producers who allegedly used firm-owned information to rebuild their businesses after leaving.
Washington, who became a broker eight years ago and joined Morgan Stanley in Potomac, Maryland, in September 2013, was ordered by federal district judge Peter Messitte to return any client information he possessed.
Reached at the Bethesda office of Seventy2 Capital, which was founded in 2016 by former Morgan Stanley brokers, Washington declined to comment.
In agreeing to a stipulated order, the broker gave up his ability to present evidence to the court to rebut Morgan Stanley’s claims.
“Rather than litigate, we agreed to a stipulated order that is consistent with Mr. Washington’s contractual obligations, and he is happy to abide by that order,” said John N. Orsini, a partner at Friedman Kaplan Seiler & Adelman in New York who represents the broker.
Since Washington had not been soliciting former clients, he asserted, the order essentially enforces the status quo.
Morgan Stanley alleged in its initial complaint that Washington met face-to-face with one client on the day that he resigned to inform him of a maturing CD and to solicit his business. It also said he had called two clients about his move, including one of his largest clients.
In addition to seeking to handcuff relatively inexperienced advisors, Morgan Stanley in recent months has sought court orders against seasoned ones with books of more than $100 million.
It prevailed last month against a broker in Atlanta who had been managing $177 million in client assets before joining RBC Wealth Management. A few weeks earlier, it obtained a restraining order against a Dallas broker generating $1.7 million in annual revenue who had moved to Raymond James. (It failed in May to obtain a ruling against an 18-year industry veteran in California who had joined Wells Fargo Advisors’ private client group, but has filed for arbitration damages against him.)
A spokeswoman at Wells Fargo, which has 1,293 advisors managing $97 billion in client assets in its independent contractor channel, declined to comment on the legal action but said it is “pleased Mr. Washington has chosen to join Wells Fargo Advisors.”
The issuance of the temporary restraining order was reported earlier by “Financial Advisor IQ.”