Fidelity Enjoins Morgan Stanley, Florida Broker in Non-Solicit Case
In an apparent victory for Fidelity Brokerage Services, Morgan Stanley and a broker it hired in Palm Beach Gardens have agreed not to contact the broker’s former clients as part of a stipulated injunction approved by a federal judge in the Southern District of Florida.
Guadagnino and Morgan Stanley also agreed to return any client contact information within two weeks, according to the filing, which capped off a year of elevated litigation against departing brokers industry-wide.
Guadagnino, who is now one of six advisors with the Haas-Compass Group at Morgan Stanley, according to the team’s website, declined to comment, as did a spokeswoman for Morgan Stanley.
Guadagnino and Morgan Stanley signed the agreement without admitting or denying Fidelity’s allegations. The Boston-based discount brokerage claimed in its initial complaint filed in October that he took a list of customer names and sent unsolicited mailings with personal letters and instructions on how to transfer accounts to at least 10 customers after joining Morgan Stanley.
The firm, which did not specify how many assets Guadagnino oversaw, also accused Morgan Stanley of encouraging the client outreach and “providing him with the facilities and resources” to solicit them.
The stipulated injunction still preserves Guadagnino’s right to solicit his family’s accounts and those of customers who are already in the process of transitioning accounts. He is also free to accept in-bound calls from former customers, although he can be held liable for damages in cases in which he had made first contact, according to the agreement.
The order to return any client contact information applies to “any Fidelity customer information that may have been created or recreated by Guadagnino from memory or by using memory to look up customer names in public sources, or derived from a list created or recreated by Guadagnino from memory,” the order says.
“Fidelity takes the protection of our customer information seriously and has policies in place to ensure that protection, including when associates entrusted with customer information separate from Fidelity,” a Fidelity spokesman said in an emailed statement. “When necessary, we will take the legal action necessary to further protect that customer information.”
In a separate case, Fidelity is continuing to press for an injunction against another advisor who left in Palm Desert, California, after a federal judge blocked its initial attempt for a temporary restraining order in October, according to court filings.
Both cases reflect what lawyers have said is an increasingly litigious environment for departing brokers and the contention by discount brokerages such as Fidelity and Charles Schwab & Co. that they own the clients because they provide the referral system for brokers unlike full service firms where brokers prospect to build their client books.
“You’re going to see Fidelity being more aggressive in the future when advisors leave and advisors try to reach out to the Fidelity accounts,” said Thomas Lewis, a lawyer at Stevens & Lee in Princeton, New Jersey, who represents brokers in employment disputes but was not involved in the Guadagnino case.
Morgan Stanley itself has filed over a dozen such cases since leaving the Protocol for Broker Recruiting almost two years ago. Fidelity is not a party to the agreement, which permits brokers to take limited client contact information when they move firms.