Wells Seeks TRO Against Four FAs Affiliated with Kestra
Wells Fargo Advisors may have remained in the Protocol for Broker Recruiting, but that’s not stopping it from going after former brokers it believes are using confidential data to contact former clients.
Wells on Wednesday filed a request for a temporary restraining order and preliminary injunctive relief against four advisors who voluntarily resigned five weeks ago to set up a hybrid advisory practice affiliated with independent broker-dealer Kestra Investment Services.
The Paramus, N.J.-based brokers—Nancy Hurst, Steven and Bruce Battel, and Robert Yevchak— collectively have more than 100 years of experience as brokers and had been with Wells since 2008, and with predecessor Prudential Securities for many years earlier.
The brokers said in their resignation letters that they had complied with the Protocol by retaining only rudimentary information about clients, but Wells said they possess much deeper client data in violation of the Protocol, according to the lawsuit iled in U.S. District Court in New Jersey.
“The protections of the Protocol do not apply to a registered representative who fails to comply with or violates the Protocol,” the complaint said.
The filing asks the court to prevent the brokers from continuing to use and disclose its alleged proprietary and “trade secret information,” to have them immediately return the allegedly stolen data and to pay attorneys’ fees and costs.
A woman answering Hurst’s phone at Liberty Wealth Solutions, the brokers’ new firm, said none of them would comment on the lawsuit. The other brokers did not return calls for comment, and Kestra spokespeople did not immediately respond to requests for comment. Kestra is not named as a defendant.
Wells, which simultaneously filed a complaint with the Financial Industry Regulatory Authority, said it learned of the brokers’ alleged violations of federal and state privacy laws and corporate policy procedures only two weeks ago.
A Wells customer said she received a package of pre-populated account transfer and other documents by Federal Express from Hurst, and brought the documents on May 16 to a Wells branch in Mystic, Conn., according to the lawsuit. The data included her social security number, a bank account number, birthdates of family members and an authorization form populated with her Wells Fargo Advisors account numbers and the value of the accounts, according to the complaint.
Large broker-dealers created the Protocol more than ten years ago to rein in rampant legal costs they were amassing by suing each other when brokers jumped among them, and also to abide by new federal privacy laws. The legal bills subsequently subsided, but Morgan Stanley and UBS Financial Services’ decisions late last year to leave the Protocol—which they claimed had lost its effectiveness by allowing small firms to recruit their brokers by joining the pact—have revived litigation against departing brokers and stimulated some brokers to preemptively sue their former firms.
Morgan Stanley and UBS have accused brokers of violating employment agreements that contained non-solicitation clauses and of using trade secrets, but Merrill Lynch, and now Wells, have also pursued brokers who left for other Protocol firms but are allegedly breaching terms of the pact.
The new Wells lawsuit is unusual in that it cites only one nonsolicitation agreement—a clause in Steve Battel’s August 2008 trainee/FAIT contract with predecessor firm Wachovia Securities. However, Wells is likely to seek other documents in discovery during Finra arbitration to bolster its arguments of violating employment contracts, according to lawyers.
Megan Christensen, a lawyer at Stevens & Lee in Lawrenceville, NJ, who is representing Wells Fargo Advisors, did not return a call for comment.