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Industry Spotlight > Broker Dealers

New Case Sheds Light on Broker Protocol

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Advisors need to carefully select the client information they take with them when switching firms, warns an attorney following the case of UBS Financial Services vs. Peter N. Junggren, Jr., who recently joined Morgan Stanley Smith Barney and is now subject to a temporary restraining order. “You don’t see lots of cases involving the Protocol for Broker Recruiting,” says Patrick J. Burns, Jr., a managing attorney in a law office in Beverly Hills, Calif. “But if the advisor in this case had followed the ‘good faith’ stipulations better than [or as] was expected, he wouldn’t have the temporary restraining order and FINRA arbitration now underway.”

According to documents reviewed by Burns, Junggren was required to act in good faith when he assembled his client list and left UBS Financial. However, UBS claims the FA took contact details for 229 clients, 105 of which were not serviced by the team that included Junggren. “The protocol requires that a departing broker act in good faith when assembling their client list,” Burns explains. “The number of clients at issue and not serviced by the team was not lost on the court.”

Junggren served as a financial advisor at UBS Financial from January 2006 through September 2009, according to Burns. Junggren then served as a wealth-strategy associate from October 2009 through mid-March 2011. Since the advisor was apparently considered to be a lower producer and made an associate, there is some dispute as to whether or not he was a producing broker for four years or more — as is stipulated in the protocol for advisors intending to take client info with them when they switch firm, according to Burns.

UBS currently includes about 6,800 advisors in the Americas, while Morgan Stanley includes about 18,000 (with most based in North America). The Swiss-owned wealth management firm has claimed that Junggren, based in Connecticut, was no longer working as a member of a team in a producing capacity. However, UBS did not have the advisor sign a written document signed by the FA acknowledging this change of status.

“Junggren’s predicament makes it clear that going forward, it is important for firms to have non-producing team associates acknowledge in writing their lack of a producing role and team membership,” the attorney explains. In terms of Junggren’s client list, UBS claims that it includes a number of clients subject to a service agreement for stock-benefit management services, making their information restricted from departing brokers.

“The takeaway here is that the protocol must be read in its entirety and client lists thoroughly reviewed to ensure they do not include stock-benefits management service clients,” the attorney explains, such as those participating in stock-option programs. “Some basic mistakes seem to have been made here,” Burns says. “This is not the best-executed transition, and there are many things that could have been done better.”  The case is now in FINRA’s hands, where a longer-term injunction will be considered as part of the arbitration and further proceedings.


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