Podcast Center
Video Center
Webcasts
Resource Center
Events
August 01, 2010 at 08:00 PM
I’ve had the privilege of assisting over 1,000 wirehouse brokers in their decision to go independent. There are two major issues for a registered representative to consider. The first is how to leave. The second is appropriate registration and ongoing regulatory complance requirements.
The relationship between a wirehouse and its reps is generally that of employer-employee, pursuant to which the employee rep provides services directly from wirehouse branded and supervised offices. Generally, there will be some type of employment agreement between the rep and the firm, which will include a restrictive covenant provision. However, the once typical contentious divorce of rep from his firm is no longer the norm, provided that the broker leaves in a manner that does not violate “protocol” limitations. What does this mean?
The principal goal of the Protocol for Broker Recruiting, which originated in 2004 between Citigroup, Merrill Lynch, and UBS, was to further clients’ privacy and freedom of choice as financial and investment advisors move between firms.
Although the protocol was intended to apply to broker/dealers (typically when a rep leaves one wirehouse to join another), its joining and corresponding standards appear to have been extended to those situations when a rep leaves to start his own independent advisory firm. Under the protocol, a rep is permitted to take limited information regarding his clients (i.e., client name, address, phone number, e-mail address and account name).
Other than the above protocol information, a departing rep should not bring any other customer information to a new employer. Typically, customer information is considered confidential and proprietary to the employer. Therefore, a departing rep copying information about clients will be subject to the return of that information and may provoke litigation. Additionally, the departing rep may need to purge computers and sign an affidavit stating that he isn’t taking confidential or proprietary information.
