JPMorgan Wins TRO Against Big Team that Jumped to LPL
(Clarifies fourth paragraph to note McDonald joined the team from UBS Financial Services.)
JP Morgan Chase has prevailed in its request for a temporary restraining order against an eight-person team of private bankers in New Orleans who jumped to LPL Financial late last month, according to a court filing issued Monday.
The seven bankers and a sales associate left JP Morgan on October 27 to form Gulf Point Advisors, a registered investment adviser and broker-dealer affiliated with LPL Financial, according to a complaint that JP Morgan filed in U.S. District Court in the Eastern District of Louisiana on November 3. It accused the group of using stolen contact data to solicit bank clients to move their accounts in violation of the bankers’ employment contracts.
In granting the bank’s request, Judge Eldon E. Fallon prohibited the advisors from contacting any clients they had worked with at the bank over the previous two years, and ordered them to return the client data they had taken. The merits of the charges will be decided by a Financial Industry Regulatory Authority arbitration panel.
The seven Gulf Point Advisors partners—Chad Dufrene, Wally Gundlach, Chris Kenny, Tris Millard, Jack Rovetto, Benton Turnage and Brian Wynne—oversaw about $1.4 billion in client assets at JP Morgan, according to the complaint. Caroline McDonald, Gulf Point’s “director of client relations,” joined Gulf Point from UBS Financial Services.
“We look forward to the Finra arbitration, where we can have a full hearing on the merits,” said Thomas B. Lewis, the team’s lawyer at Stevens & Lee in Princeton, N.J. “The Finra panel will determine the enforceability of any agreement under Louisiana law.”
A J.P. Morgan spokeswoman declined to comment on the Louisiana case or on whether the bank has accelerated its filing of restraining order requests to impede a high exodus rate tied to new minimum account requirements and a recent private bank reorganization.
Prior to creation of the Broker Protocol in 2004, large brokerage firms commonly ran to court to prohibit breakaway brokers from contacting employees, building up high legal bills in their attempt to keep client assets from leaving. Although hundreds of large firms now subscribe to the Protocol, which permits departing advisers to take limited customer contact information, JP Morgan exempts its private bankers from the Protocol’s protections.
Just six weeks ago, the banking giant successfully won a restraining order against a billion-dollar team of Oklahoma-based private bankers who had jumped to Wells Fargo in August. The judge accepted as evidence a Facebook notice about the move that one of the bankers in the unit for “ultra-high-net-worth” clients had posted.
In the new TRO filing, which was first reported by FundFire, JP Morgan also cited social media, saying the advisors asked their former clients to “friend” them on Facebook or connect with them on LinkedIn and other social platforms.
The complaint also accused the Gulf Point bankers of making “false and disparaging statements about JPMorgan,” including telling numerous clients that JP Morgan considered their accounts “too small” to be serviced within the private bank, the complaint said.
Under JP Morgan’s employment contracts, private bankers must wait a year before they can contact former clients, according to the complaint. Virtually all of the New Orleans team’s 190 client-households were assigned to them or developed as a result of referrals from other parts of the bank, it said.