Non-Compete Agreements for Financial Advisors in Virginia

We love representing professionals in the financial services industry who need help with their non-compete agreements.

Why do we feel such a kinship toward these professionals? It is not because we get stock advice or other financial services in exchange for our advice, but rather, because the financial services industry has taken the bull by the horns so to speak, and begun to define how non-competes will be used and enforced in the industry.

In 2004, CitiGroup (Smith Barney), Merrill Lynch and UBS, drafted and signed the Protocol for Broker Recruiting. The document, most often referred to as the Protocol essentially allows financial service providers to move from firm to firm, and take client lists, if (and only if) the firm they are leaving and the firm they are going to, are signatories to the Protocol.

Essentially the agreement recognizes that client relationships are key to the industry, and that clients should have freedom of choice in connection with the movement of their book of business.

Thankfully, the big three are not the only signatories and to date there are over 300 large and small houses who have signed the agreement.

When stock brokers call our office, the first question we ask is (1) what firm are you leaving? The second question we ask is, (2) where are you going?

If both firms are Protocol firms, the employee may take the following client information: Client name, address, phone number, email address and account title of those clients you personally served. The employee may not take ANYTHING else.

Further more, the Protocol is basically an agreement between firms that they will not sue employees or their new brokerage houses if employees play by the rules. The Protocol even provides for how the employee should resign and take the permissible client information.

The Protocol has essentially transformed an industry by simply acknowledging that good employees work hard for their clients and in return, clients want to stay with people, not brokerage houses.

It is also revolutionary because Courts across the country, are deciding non-compete cases regarding financial service employees, citing the Protocol even when the firms at issue are not signatories.

What do I mean by this? Just recently two federal judges in Ohio and Indiana essentially held that firms could not claim they were damaged by an employee taking his book of business regardless of whether both firms were Protocol Signatories. In Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Brennan (Ohio Feb. 23, 2007) the Court held that as Merrill Lynch had signed the Protocol in 2004, they had effectively conceded that the transfer of client lists to a new firm, could not cause them harm.

Although the Protocol does not totally protect employees from suit as they would still be liable for any business torts (interference with contract, conversion, defamation, breach of non-solicitation, etc) it does provide rules on how to transfer business.

Want to know if your employer is a Protocol Firm? Ask.

Here is an incomplete list of those houses incorporated in Virginia and doing business here, that have signed the Protocol to date:

  • CitiGroup;
  • Merrill Lynch;
  • Wells Fargo (Wachovia Securities);
  • Davenport & Company, LLC;
  • Wealth Capital Management;
  • Alpha Omega Wealth Management, LLC;
  • Kerr Mowry Purosh Group, LLC;
  • Capital Securities Management;
  • Mentor Wealth Management;
  • Anderson & Strudwick;
  • Grey Owl Capital Management;
  • Fulcrum Securities;
  • Spire Investment Partners;
  • Lara, Shull & May;
  • Harrison & Co. Wealth Management;
  • Holden Global Financial Consulting;
  • Wilbanks, Smith & Thomas Asset Management;
  • Nike Investment Partners;
  • MICG Investment;
  • Courage Partners LLC;
  • Retirement Planning Services, Inc.

It is our hope that the list will continue to grow and Virginia financial advisors will be given the freedom to serve where and whom they wish.

If you need assistance in defending litigation from a former employer, Protocol signatory or not, please do not hesitate to contact our office.

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