Morgan Stanley Chases Junior Broker in Case Testing Broker Protocol Limits
Morgan Stanley has gone to court to prevent a 31-year-old advisor from soliciting clients of the $1.2 billion New Jersey team that he resigned from last Friday to join an independent advisory firm, a signal that the company will not tolerate competition from even junior advisors.
In a filing with a federal district court in Pennsylvania on Monday, Morgan Stanley accused Brian Lynch of violating his employment contract and other agreements by taking names, email addresses, account types and other contact information of all clients serviced by his 10-person team in Mt. Laurel, NJ, and of dissuading a prospect from opening an account pending his arrival at his new firm.
Lynch, who joined Morgan Stanley four years ago and is now with Kathmere Capital Management in King of Prussia, Pa, was arguably entitled to take contact information as a “designated joint producer” on just $40 million of the team’s more than $1 billion in client assets, according to the court filing that seeks orders restraining him from contacting its clients and employees.
It also accused him of having tried in his last week at the firm to set up a meeting with “a very large Morgan Stanley client” in May, when he knew he would be at his new firm, and of trying to prevent another prospect from opening a Morgan Stanley account.
The court filing, and a simultaneous arbitration filing with the Financial Industry Regulatory Authority, casts further light on the vicissitudes of the Broker Protocol that firms created to save themselves legal costs involving broker departures and to ostensibly protect clients’ privacy rights.
The protocol, which Lynch invoked in his resignation letter and which permits departing brokers to take rudimentary client contact information, protects only those brokers who join another firm that has signed the agreement. Kathmere is not a signatory and, even if it were, Lynch retained “far more information than he would have been permitted,” Morgan Stanley wrote in the court filing.
In an interview, Lynch said he merits protocol protection because he has parked his securities license with independent brokerage firm LPL Financial, which is a signatory. He referred other questions to his lawyer, Luigi Spadafora of Winget, Spadafora & Schwartzberg, LLP in New York, who did not return a message.
A Morgan Stanley spokeswoman declined to comment about the firm’s intent in pursuing Lynch.
“The purpose is to send a message through the court system, not only to this advisor, but all advisors in all states,” said Thomas B. Lewis, a lawyer at Stevens & Lee in Princeton, NJ. Lewis, who often represents advisors in claims against employers, said he was not familiar with details of the Lynch case.