Judge Issues TRO Against $14 Mln UBS Team that Jumped to Morgan Stanley

(Headline and story updated to reflect judge’s granting of TRO prohibiting customer solicitation through January 7, 2021.)

A judge has ordered a $14-million Boca Raton, FL, team that left UBS for Morgan Stanley earlier this month to stop soliciting former clients through the first week of January 2021 and to return to UBS confidential information they had.

“I am not persuaded by Defendant Sean Fetterman’s argument that the preliminary injunction will cause substantial harm to his reputation,” U.S. District Court Judge Donald Middlebrooks in Palm Beach wrote in a December 23 order granting UBS’s request for a preliminary injunction. “He has spent decades building his reputation and client relationships, and those are unlikely to be substantially harmed by a brief injunction.”

 Fetterman and five associates, including his brother and his son, joined Morgan Stanley the same day they resigned from UBS on December 4, and “within a matter of just a few days” succeeded in convincing former clients to request transfers of more than $200 million from about 30 accounts, the judge wrote. Subsequently, according to testimony he cited from the UBS Boca Raton office’s administrative manager, more than $500 million transferred to Morgan Stanley.

The team members violated client confidentiality covenants in their UBS employee agreements while the Fetterman brothers and advisor David Raphan also violated solicitation agreements, the judge ruled.

He was skeptical of their testimony that they obtained client contact information from online public records and directly from clients rather than from UBS-owned data, citing “the sheer number of clients that the Defendants succeeded in making contact with over the weekend following their resignations and the detailed account information that they purportedly obtained from clients.”

The Fetterman team, which generated $14.3 million in annual revenue for UBS on $1.79 billion in managed assets, negotiated an “eye-popping transition deal” with Morgan Stanley that could reach $35-40 million, UBS asserted when it sought the temporary restraining order and preliminary injunction on December 11. The complaint said Sean Fetterman personally managed about $1.25 billion of the team’s assets and produced more than $9.5 million of its revenue.

“We are pleased the Court found that Mr. Fetterman and his team violated their agreements and is holding them to the terms of those agreements,” a UBS spokeswoman said in an emailed statement. “We look forward to continuing to prosecute this matter in FINRA arbitration.”

In its TRO request, UBS said the Fetterman team appears to have convinced “an unusual number” of clients to close out securities-backed loans in the months leading to their resignation so that their accounts would be eligible for transfer via the ACAT system.

The complaint also noted a detail that one employment lawyer who is not involved in the case said appears to signal particular bitterness about the departure of Fetterman, who ranked #5 this year among Barron’s “top” Florida advisors.

“Remarkably, Sean’s resignation occurred just days after UBS had just completed a bespoke renovation and build-out of his team’s office suite that cost the firm in excess of $100,000,” said the complaint, which was filed by law firm Littler Mendelson on behalf of the wirehouse.

Reached on his cellphone before the judge issued the TRO, Fetterman said he could not immediately comment on the suit because he was monitoring the market, but noted that the renovation that began 18 months ago has still not been completed.

“The firm brings this action in view of this team’s malicious and blatant disregard for their contractual obligations and fiduciary duties to UBS, which UBS intends to enforce to the fullest extent of the law,” said UBS Wealth Management spokesman Huw Williams.

Morgan Stanley was not named as a defendant in the TRO request.

Fetterman, who joined UBS in May 2008 from Wachovia Securities with his brother Adam, signed a commitment two years ago to eventually enter UBS’s “ALFA” program that allows retiring advisors to be paid for five years on accounts transitioned to other advisors, according to the lawsuit. He received a forgivable loan of $7.05 million for committing to the program, it said.

The complaint did not accuse Fetterman of owing UBS money on the loan or on other bonuses, but said his ALFA commitment was one of several employment agreements he had signed containing noncompete, non-solicit and confidentiality provisions.

In addition to Sean and Adam Fetterman, the lawsuit names as defendants junior brokers David Raphan and Brandon Fetterman, who is Sean’s son, client associate Deborah Humphrey and team administrator Leticia Buckley.

Both UBS and Morgan Stanley withdrew three years ago from the Protocol for Broker Recruiting, which permits advisors to retain some client-contact information when moving to signatory firms. While the exit gives the firms the whip of litigation, suits from UBS against fleeing brokers have been relatively sparse, according to several employment lawyers.