J.P. Morgan, Schwab Win Orders Handcuffing Breakaway Brokers

8 Nov    Investing News

J.P. Morgan Securities and Charles Schwab won legal battles this week in their increasingly aggressive pursuit of brokers they claim are illegally contacting former clients.

A federal magistrate judge on Tuesday issued J.P. Morgan a temporary restraining order barring Justin L. Barroso from contacting former clients from her new position at a Fort Lauderdale, Fla., branch of UBS Wealth Management USA that she joined a month ago. The bank filed its request for a restraining order and injunction on Monday, pending outcome of a parallel Finra arbitration claim.

It said Barosso had contacted at least eight clients she knew from her decade with its in-bank-branch Chase Private Client group.

“JPMorgan will suffer irreparable harm and loss if defendant is permitted to solicit JPMorgan’s clients on behalf of her new firm…and to convert JPMorgan’s confidential and proprietary client information to her own use and that of UBS,” Judge Patrick M. Hunt of the U.S. District Court for the Southern District of Florida ruled.

He schedule a meeting for November 18 to discuss whether the TRO should be converted into a permanent injunction.

The ruling fuels growing attempts by bank-based brokerage organizations and discount brokers to pursue largely salaried advisors who they claim were hand-fed customers, as opposed to counterparts at traditional full-service brokerage firms who build their own books. Wirehouses and other traditional firms had more typically gone to courts to deter customer solicitations in the crucial early days of a broker’s arrival at a new firm.

Neither Barroso nor her lawyer, Victor Petrescu, responded to requests for comment.

J.P. Morgan alleged that Barosso, a certified financial planner who began her brokerage career in 2007, transitioned $14 million of the $184 million of client assets she had been overseeing to UBS in her first few weeks with the firm.

Separately, ex-Charles Schwab broker Alfredo J. Martinez reached a stipulated settlement with his former employer on Thursday agreeing to stop soliciting clients he had developed over 13 years at the discount brokerage firm until September 8, 2020 and to return any firm-owned data he may have taken.

Martinez, a New Orleans area broker who left Schwab in March after almost 14 years, has worked since April at LPL-affiliated Gulf Coast Wealth Management, a hybrid registered investment advisory firm. As part of the stipulated agreement, he denied liability, wrongdoing, unlawful or unethical conduct.

Schwab’s lawsuit, which it brought in July in federal court in the Eastern District of Louisiana, continued a string of litigation aimed at brokers who worked with clients in advisory units of the firm, as opposed to its more typical base of self-directed investors.The San Francisco, California-based discount brokerage pioneer has reached settlements in at least five cases against fleeing brokers since September.

Schwab “will not hesitate” to enforce its reps’ contractual obligations regarding protection of customer information and confidentiality in a court or arbitration proceeding, said Pete Greenley, Schwab’s managing director of corporate reputation.

Martinez’ lawyer, John C. Anjier, said he could not immediately comment on the decision and upcoming arbitration hearings. Martinez did not respond to a request for comment.

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