Two Big Firms Exit Broker Protocol, Financial Advisors may be Vulnerable to Litigation
UBS Wealth Management Americas is exiting the Protocol for Broker Recruiting, also known as Broker Protocol, according to an announcement on Monday.
According to reports, UBS executives informed their sales force of the decision Monday morning, and the pullout will be effective on Friday, December 1.
The Broker Protocol was established in 2004 by a handful of large firms to make it easier for brokers to leave firms and to reduce litigation costs. The agreement permitted brokers to jump to other Protocol signatories without fear of being sued. But now, those protections are disappearing.
Brokers who jump among Protocol signatories are permitted to take their client-contact information with them to their new firms. Prior to the Protocol’s creation, large firms would seek orders temporarily restraining them from calling former clients to jump-start their practices at their new employers.
Now that some of the big firms are exiting Broker Protocol, it could leave many advisors vulnerable to litigation once again. There may be uncertainty for a financial advisor regarding whether the recruit will be subject to an injunction. They may not be allowed to solicit their customers to transfer their accounts to his/her new firm.
Litigation associated with one broker moving to a new firm includes: pre-resignation solicitation, claims for amounts due under promissory notes, claims for training costs, claims for violations of the Protocol, and raiding claims arising from group hires.
If you are a financial advisor involved in litigation, the securities attorneys of The White Law Group may be able to help you. For a free consultation with a securities attorney, please call 888-637-5510.
The White Law Group, LLC is a national securities arbitration and securities regulation/compliance law firm with offices in Chicago, Illinois and Vero Beach, Florida.
For more information on the firm, please visit www.whitesecuritieslaw.com.