Six Morgan Stanley financial advisors previously managing about $1.79 billion in client assets for UBS Financial Services have been slapped with a lawsuit filed by their former employer on Friday in the Southern District of Florida.
And Teresa J. Verges, a former assistant director of enforcement for the Securities and Exchange Commission and the current director of the investor rights clinic at the University of Miami School of Law, said UBS has a larger problem if the allegations it has made against the advisors are true. Among them is the potential violation of Regulation SP, which is a rule that protects confidential client information.
“While the departure of over $1 billion of client assets may be the primary driver of this lawsuit,” said Verges, who is not involved in the litigation, “a significant concern I would have from the firm’s perspective is the potential liability for violations under SEC regulations requiring firms to protect confidential customer information that — according to the complaint — has walked out the door.”
The dispute in this lawsuit stems from an agreement that Sean Fetterman reached with the Swiss-based investment bank. He led the team of six financial advisors at the Fetterman & Fetterman Wealth Management Group to leave the UBS Boca Raton office on Dec. 4.
Among the terms Sean Fetterman agreed to in the ALFA Premier Plus Commitment Agreement was select post-employment restrictive covenants, including a non-compete covenant and a one-year non-solicitation of UBS clients, in exchange for an immediate payout exceeding $7 million, according to the complaint, which surfaced on Law.com Radar.
However, when Morgan Stanley came knocking on his door, Fetterman allegedly re-engaged on his contractual commitment in favor of a better deal with the American-based wirehouse. Also, Fetterman’s team of advisors are accused of printing thousands of pages of documents containing highly confidential UBS client information, according to the complaint.