Goldman Sachs Restricts Chicago Brokers from Calling Former Clients
(Updates fifth paragraph with departure of a Goldman advisor in Florida to form an independent RIA and ninth paragraph with Goldman’s withdrawal of its arbitration complaint against Friedstein and Page.)
Two former Goldman Sachs advisors in Chicago who left two weeks ago to form an independent advisory firm have been barred by a court from contacting their former clients for 90 days.
Jeffrey Friedstein and Joseph Page stipulated in an agreement filed Friday in a New York State court that they will not directly or indirectly solicit former clients or former employees to join their new firm, Grey Street Capital, until August 17. The agreement overrides a request for a temporary restraining order that Goldman filed on May 22 and underscores the New York-based firm’s intent to play hard ball with its small force of “private wealth management” advisors who defect.
Goldman is not a member of the Protocol for Broker Recruiting, which permits brokers to take rudimentary client-contact information when moving among signatory firms, and has been aggressive in pursuing brokers it suspects of violating terms of the 90-day “garden leave” clause in their employment agreements, recruiters say.
Goldman, whose Wall Street prestige rides largely on its investment banking and trading prowess, employs about 400 advisors within its asset management division who offer brokerage services and wealth management advice to wealthy clients and their families. In recent months, the small unit has been roiled by departures of multi-billion-dollar teams in Washington D.C. and in San Francisco.
The tremors are continuing this week as former Goldman advisors David Darby and Melissa Gray have joined together to form DG Wealth Partners, an independent advisory firm in Palm Beach, Florida. Darby had been with the firm for 21 years before resigning on Friday while Gray left in October after five years at Goldman. The team, which “supervised” $1 billion in client assets, will use Schwab Advisory Services as its custodian and Dynasty Financial Partners for operational support, according to Dynasty.
Friedstein and Page, who had been with Goldman since 1997 and 2000, respectively, led a seven-person team serving 50 clients “with very substantial assets under Goldman Sach’s supervision,” according to the firm’s original complaint that named only the two lead brokers.
The pair had “for months been pursuing a secret plan” to start their own firm and successfully solicited two clients to move in violation of the non-solicitation agreements they had signed, it said.
It also alleged that they unsuccessfully urged at least one Goldman Sachs employee to resign and join their new venture.
Friedstein and Page stipulated to abide by terms of their employment agreement while Goldman agreed to withdraw a complaint filed with a Financial Industry Regulatory Authority arbitration panel over their alleged solicitation violations.
Goldman’s initial request for a restraining order said the pair hoisted themselves by their own petard in registering Grey Street Capital with the Securities and Exchange Commission.
The firm’s ADV filing disclosed that Timothy Mullen, described in the complaint as a “large” and “longtime” Goldman client who was assigned to Page in 2004, was a founding member of Grey Street.
It also said that William Boer, former chief operating officer of the family office of Amway Corp. cofounder Richard DeVos, has at least a 10% stake in Grey Street Capital. Boer owns the Orlando Magic basketball team and is president of Grey Dunes, which advises wealthy families on selecting advisors.
Sharron Ash, a lawyer at the Hamburger Law Firm in Englewood, NJ. that specializes in helping brokers transition to become independent advisers and that represented Friedstein and Page, did not respond to a call for comment.
Messages left at Grey Street for Friedstein and Page also were not returned.
As part of the stipulated agreement, Goldman said it would not consider “mere contact” with former clients as a violation of the former brokers’ employment agreements as long as clients of Grey Street certify they were not directly solicited.
A spokesman at Goldman did not respond to requests for comment on the departure of Darby and the agreements with Friedstein and Page.
—Jed Horowitz contributed reporting and writing to this story.