Morgan Stanley Sues Another Fleeing Broker, This Time in Indiana
Morgan Stanley on Wednesday asked a federal judge in Indiana to restrain a former broker from contacting his former clients, saying it intends to send a message to its almost 16,000 brokers and to competing firms that it will protect its flanks and customer assets with legal remedies.
For at least the fourth time since withdrawing from the Protocol for Broker Recruiting at the end of November, the New York-based brokerage giant accused a former broker of potentially breaking employment and account-inheritance contracts and causing the firm irreparable harm by exploiting confidential information about its clients.
It sued Nathan Rumely, a Mishawaka, Indiana-based broker who had spent his 17-year career at Morgan Stanley and its Smith Barney predecessor before joining regional brokerage Robert W. Baird in the same city on January 8.
Rumely, who was a first vice president at Morgan Stanley and who left the firm on January 3, according to an affidavit filed with the U.S. District Court in South Bend by the firm’s lawyers, declined to comment on the filing, the allegations or the size of his former book of business.
As in previously successful requests for temporary restraining orders, Morgan Stanley accused him of breaching his initial employment contract (signed in 2001 as a trainee) and of violating separate inherited account and joint production agreements signed in 2013 and 2014. It also simultaneously filed petitions for expedited Financial Industry Regulatory Authority arbitration hearings, according to Wednesday’s court filing.
The inherited account contract, or Former Financial Advisor Program, at Morgan Stanley is particularly restrictive, some veteran advisors have said. It includes the broker’s consent to issuance of a temporary restraining order or a preliminary injunction to enforce its one-year non-solicitation and confidentiality clauses, according to the complaint.
“Morgan Stanley expects all former employees to comply with their legal and contractual obligations to the firm,” a Morgan Stanley spokeswoman wrote in an e-mail.
The company also asked the Indiana court to order Rumely and his new manager at Robert W. Baird to participate in quickly scheduled depositions because they have “crucial evidence that is in the exclusive possession of Defendant and Baird,” including “the precise clients he has solicited.”
The filings also clearly enunciated Morgan Stanley’s intent in pursuing neophyte and veteran brokers who join a variety of rival broker-dealers and small advisory firms.
“[I]mmediate injunctive relief also is necessary to ensure that other financial advisors comply with their contractual and other obligations, and to discourage competitor firms from paying huge inducements to Morgan Stanley’s financial advisors to entice them to violate their commitments and to divert Morgan Stanley’s clients to a competitor,” said a court affidavit filed by Shaw Friedman, the firm’s local lawyer in LaPorte, Indiana.
Robert W. Baird is not known to be a particularly aggressive recruiter or to offer particularly fat signing bonuses, according to former managers and outside recruiters.
Rumely’s former title of first vice president on a two-person team, according to his former website, denotes annual production of at least $825,000, according to the firm’s 2017 compensation plan, although his title could have been awarded earlier at lower quota levels.
Rumely’s former partner, Gregory Strintz, who remains at Morgan Stanley, did not return a call for comment. The Baird broker’s father, Peter Rumely, worked at Smith Barney and Morgan Stanley from 1993 through the fall of 2013, according to the latter’s BrokerCheck record.
In previous attempts to thwart Morgan Stanley’s TRO efforts, brokers have argued that clients they were contacting were developed largely on their own, and that Morgan Stanley itself sanctioned their bringing new clients with them when they initially joined the firm.