UBS’ Death Blow to Protocol Makes a Few Lawyers Happy (Sorta)
Well, the Broker Protocol had a good run. It helped brokerage firms save time and money. It helped brokers change firms without much of a hassle (provided they abided by its terms). And best of all, no customers were harmed in the process. This was a win-win-win.
Frankly, the only losers since the Protocol took effect have been law firms that used to print money prosecuting and defending run-of-the-mill recruiting cases around the country.
To be sure, securities industry ‘recruiting litigators’ didn’t exactly need fundraising telethons. But with UBS’s announcement that it will be exiting the protocol, following Morgan Stanley’s lead, and with Merrill Lynch almost certain to follow, thoughts of telethons are completely unnecessary.
The big firms will now return to the old days of arguing over what is a solicitation versus an announcement and writing briefs on what data belongs to the firm, or to the broker or to the customer. Issues of who owns a customer relationship that brokers originate versus those they inherit that have rarely been addressed in the last 13 years will again be in the forefront.
And then there is the labor.
The Friday afternoon phone calls will return. The branch manager will call the in-house lawyer. The in-house lawyer will call the outside counsel. The outside counsel (and the unlucky staff associated with that lawyer) will call her/his family cancelling the weekend plans. In-house counsel at the losing firm will call in-house counsel at the hiring firm.
Threats will be made. Phone calls will be made to judges’ chambers to schedule injunction hearings. And, as they say, firms’ recruiting costs and legal bills will increase exponentially.
I remember those good old, bad old days. I had my share of ruined plans and last-minute trips. And despite my participation in the-meter-is-running arbitrations in cases that didn’t settle and countless other iterations of brokerage employment litigation, nobody should be eager to see those days return.
How can such stress, anxiety and expense be avoided? Keeping the big players in the Protocol is the obvious answer, but that doesn’t seem to be in play. The signatories to the Protocol were like the three legs on a stool. Remove one of the legs, and the stool becomes pretty unstable. Remove a second leg, and you have a very uncomfortable situation. The third leg will soon collapse from the stress. The stool, despite thousands of small-firm supporters, is toast.
My suggestion, not surprisingly given my focus these days, is mediation. Once the initial letters are sent and initial pleadings are filed, a case is ripe for mediation. Logistics, to be sure, can be a problem. With everything happening so quickly and client accounts in the balance, how do you get everyone, including both local counsel in, say, Omaha, and national counsel in New York, to appear before a mediator over a weekend?
The answer is that in-person mediation is no longer necessary. Advances in technology allow for private videoconference mediation. This means a virtual main meeting room and virtual caucus rooms. Because the mediator, as host of the videoconference, controls who is assigned to which room, security is assured. And there is no danger of having an opponent eavesdrop intentionally or accidentally on a poorly-insulated conference room where strategy is being discussed.
Finally, there are cost savings: airfares, meals, hotels and valuable travel hours are no longer in the picture.
In the interests of efficiency—for firms, brokers and most of all, once again, clients—I hope litigants will embrace the future or risk reliving the past.
Marc S. Dobin is the owner of DobinLaw Group and DobinMediation in Jupiter, Florida.