JPMorgan sues Raymond James advisor over client contacts; $27M already transferred
In a case marked by mutual allegations of bad faith, JPMorgan is suing to block one of its former advisors from contacting clients from his new perch at Raymond James & Associates.
Since leaving in September, advisor Erik Weiss has already transferred $27 million of the $197 million he managed at JPMorgan, according to his former employer.
The bank is seeking an injunction and temporary restraining order against Weiss, accusing him of "aggressive solicitation of JPMorgan clients, and disparaging JPMorgan in the process."
Weiss, who had worked out of an Indianapolis branch, shot back claiming that he did nothing improper, that he was obligated to notify his former clients of his job change, and warned that JPMorgan has already hindered his practice simply by filing a legal action.
"He may never recover from the further reputational harm that would be caused if an injunction is actually issued," Weiss' attorneys argued in their response to JPMorgan's complaint. "JPMorgan will likely cite an injunction to clients as proof that Mr. Weiss has done something illegal, when he has not."
By contrast, they contend that JPMorgan, with its sprawling market presence and army of employees, will not face any "appreciable harm" should Weiss continue to recruit clients free of an injunction.
"It can absorb the loss of one employee from one branch office," Weiss' attorneys argued.
Meantime, JPMorgan contends that Weiss denigrated the products offered by his former employer as he attempted to encourage clients to follow him to Raymond James.
JPMorgan declined to comment on the case. Weiss, his attorneys and Raymond James did not immediately respond to requests for comment.
The case comes as the latest dispute between a major brokerage houses and a departing broker who begins reaching out to former clients in the process of setting up a practice under a new corporate umbrella.
Many advisor moves are covered by the Broker Protocol, a voluntary industry framework intended to provide for an orderly transition as brokers move from firm to firm by setting out a template for what client information they can take with them.
However, Weiss worked as a broker in the banking channel of JPMorgan, and his attorneys anticipate that the plaintiff will argue that the protocol strictures do not extend to its banking advisors.
JPMorgan did not explicitly cite the Broker Protocol in its initial complaint, but Weiss' attorneys appear to be staking much of their defense on the argument that the protocol provides for taking basic client information, and firms that sign on to the framework cannot apply it selectively to different facets of their retail businesses.
"Courts have recognized that protocol firms cannot claim that the client names or contact information are trade secrets or confidential information because those firms allow brokers to walk out the door with their client information," Weiss' attorneys argued.
"JPMorgan will be wholly unable to explain how it can claim that for certain of its brokers the client lists are strictly confidential or trade secret ... while other JPMorgan brokers are freely permitted to walk out with client lists and full client contact information and take that information to competitors," they said.
In its initial complaint filed in federal court in Indiana, JPMorgan said that its employees had spoken with many of the clients who had worked with Weiss, "several of whom have informed JPMorgan that Defendant has contacted and solicited them since his departure from JPMorgan."
"Such clients have confirmed that defendant [Weiss] has contacted them not simply to announce his change in employment, but is actively soliciting their business on behalf of Raymond James," JPMorgan contended. The bank alleges that clients report being contacted by Weiss via phone call or text message, and cites one unnamed client who allegedly said he felt "pressured" by Weiss to meet and transfer his account.
Weiss' attorneys dismissed those allegations as "triple hearsay," and contend that Weiss did not, in fact, solicit clients, but instead relied on "casual memory" and "publicly available sources" to alert his former clients that he had moved to Raymond James. His attorneys maintain that the process by which he contacted clients is both "legally permissible" and "formally accepted in the securities industry." Further, in the response to the initial complaint, his attorneys include declarations from two clients, identified by name, who support Weiss' version of the transition.
In its complaint, JPMorgan lays out numerous charges against Weiss, including the contention that he breached his contractual agreement by taking and using confidential client information, misappropriation of trade secrets and that he violated both his fiduciary duty and his duty of loyalty to his former employer.
Weiss, a CFP, counters that he was in fact bound by his fiduciary duty to notify clients of his move to another firm, and that failing to do so would have amounted to a breach of that responsibility.
A hearing on the matter is scheduled for Nov. 8 in federal court in Indianapolis.
JPMorgan is pursuing a similar case against Weiss through FINRA arbitration.