Morgan Stanley Sues Connecticut Vets on Heels of Their Jump to Janney
Morgan Stanley Wealth Management wasted no time in taking action against a former branch manager and her partner who jumped on Tuesday to Janney Montgomery Scott in the seaport city of Mystic, Conn.
June Strunk and Shane O’Brien violated non-solicitation agreements by emailing clients whose accounts they had “inherited” from a retiring broker in 2014, Morgan Stanley alleged in seeking a restraining order on their solicitation activities one day after they set up shop at Janney.
While court actions have become rarer in the brokerage industry among signatories to the Broker Protocol, which was aimed at lowering legal costs in recruiting suits, Morgan Stanley appears to be setting up an argument that the particular client data is not protected by the pact. At the same time that it filed for the temporary restraining order in federal court in Connecticut, it submitted an arbitration complaint with the Financial Industry Regulatory Authority.
Also driving the larger firm was the team’s alleged clout within their branch. The pair generated $1.8 million in fees and commissions, or 40% of their Mystic branch’s revenue, according to the court complaint. They were managing $300 million of assets for Morgan Stanley customers, it said.
Strunk, a former Smith Barney broker who joined Morgan Stanley with its 2009 acquisition of that firm, said she could not comment because she had not yet seen the complaint.
At Janney, she is managing a satellite office of a branch that the Philadelphia-based regional firm opened in Mystic in October when it hired five Merrill Lynch advisors who were producing $4.5 million.
Strunk and O’Brien sent their former customers a “blast email” shortly after resigning to invite them to an open house on Saturday, May 20, at their new office, Morgan Stanley alleged.
“Strunk makes clear in her email that: ‘We will tell you all about Janney, our decision and answer any questions you may have. We will also have the necessary paperwork in hand to help you fill it out,’” the Morgan Stanley complaint said.
The email violates the internal “Former Financial Advisor Program” agreement that blocks them from soliciting accounts inherited from Laurel Butler, a Morgan Stanley broker who is receiving a trail on the revenue from those accounts under the agreement, Morgan Stanley said. “These covenants protect both Morgan Stanley and also Ms. Butler, who receives a continued payout on accounts only so long as they continue their business relationship with Morgan Stanley,” the filing said.
It did not spell out how many clients or assets were inherited from Butler.
Morgan Stanley also asserted that O’Brien violated non-solicitation agreements by contacting clients of another financial advisor at an office in Essex, Conn. Those agreements and the inherited account agreement override protections on taking limited client data that are provided by the Protocol, its court filing said.
In a press release announcing its new Mystic office on Thursday, Janney noted that Strunk is a certified financial planner with a Ph.D. in chemistry from Brown University who has “been advising clients in the Mystic area since 1999.” She began her career that year at Smith Barney, according to Finra’s BrokerCheck.
O’Brien began his brokerage career at Dean Witter Reynolds in 1995 and worked at a number of firms before moving to Morgan Stanley in 2015 from Prudential Securities, according to BrokerCheck. He and a spokesman for Janney declined to comment on the lawsuit and arbitration filing.