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Broker/Advisor Transitions and Protocol Issues

When registered individuals, including retail brokers, institutional sales teams, investment bankers, research analysts, traders or management executives, decide to seek a change of employment, they should consider retaining experienced counsel early in the process to guide them through potential problems which may arise from their transition of employment. Our firm has guided hundreds of industry professionals and teams through the transition process, including some of the largest producers and teams in the industry. We offer intelligent, strategic advocacy on behalf of employees and employers in the financial, securities, and investment industries.

At Lax & Neville LLP, we work with some of the highest-regarded recruiters/head hunters in the country and we have no conflicts with the larger firms or wire houses. Instead, we are fiercely independent from these firms. We have negotiated contracts on behalf of employees moving to large firms nationwide and are aware of the contract terms that are generally negotiable and those that are not. We have also successfully transitioned financial advisors from the large wirehouses to independent firms. Lax & Neville LLP’s experience in these matters and staunch independence allows us to successfully negotiate on our client’s behalf.

When hiring an attorney, employers and industry professionals should be aware that there are many issues that are unique to the securities industry because it is highly regulated by both governmental and self-regulatory bodies. Our team at Lax & Neville LLP is well-versed in the regulatory framework of the securities industry, including SEC Regulation S-P. When an industry professional switches jobs, there is legal risk regarding what constitutes proprietary firm materials and confidential client information. We can help our client’s transition smoothly, navigating the necessary regulatory issues and mitigating legal risk.

In particular, we advise both transitioning brokers and firms regarding the “Protocol for Broker Recruiting” (the “Protocol”), which was created in 2004 by a few major brokerage firms to permit departing representatives to take certain limited client information with them to a new firm and solicit those customers without the fear of being sued by their former employer. The Protocol has grown to include over 900 signatory firms and has a stated goal of ensuring client privacy while enabling client freedom of choice. When registered representatives transition between firms and both firms are signatories to the Protocol, the registered representative may take only the following account information: client name, address, phone number, email address, and account title of the clients that they serviced while at the firm. Registered representatives are prohibited from taking any other documents or information. Our attorneys have substantial experience advising numerous registered representatives in ensuring they appropriately solicit clients and comply with the provisions of the Protocol. Our success in these matters has saved our clients significant legal fees by avoiding litigation with their former firms. However, there may be incidents when litigation is unavoidable and our attorneys at Lax & Neville LLP have years of experience representing industry professionals in all manners of employment disputes.

Not all brokerage firms are signatories to the Protocol. Our attorneys also have significant experience advising registered representatives moving between firms when one of the firms is not a Protocol member. Again, in that instance, we advise them as to the best practice in order to avoid litigation with their former firm, including what information they are allowed to take to their new firm and how to communicate with customers once the transition is complete.

Furthermore, when a firm is considering whether to sign the Protocol, we are able to advise them by helping them weigh the important factors necessary to make that decision. We have advised many firms on the determination of whether to join the Protocol.

Our firm provides personal service with extensive resources to offer quick turnaround because we understand that time is of the essence during the transition process. Our attorneys are experienced with all of the following:

  • Broker transitions, including contract negotiations. We have negotiated contracts with every major securities firm and represented some of the largest producers or teams in the industry;
  • Assistance to producers with the review of existing agreements and counseling them through the recruiting process;
  • Stockbroker employment contracts, including dispute resolution clauses calling for litigation and arbitration of disputes related to breach of contract or severance agreements;
  • Comprehensive consultations with retail producers and firms regarding the Protocol for Broker Recruiting and transitions with an eye towards avoiding costly litigation and temporary restraining orders;
  • Negotiating and resolving promissory note matters for firms and producers, which includes negotiating payment plans;
  • Negotiating/reviewing retention packages and severance agreements.
  • Advising on non-solicitation, non-competes and “Garden Leave” provisions in employment agreements.

If you are an industry professional, who is considering changing firms or have any questions regarding how that process works, please contact Lax & Neville today and schedule a consultation.

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