Judge Upholds RayJay Brokers’ Outreach, Cites Clients’ Needs Amid Volatility
A federal judge has for the second time denied Regions Bank’s bid to restrain two Raymond James & Associates brokers from contacting their former clients at Regions, according to an order issued on Friday in U.S. District Court in the Middle District of Florida.
“In a time of market volatility, a client’s inability to consult a trusted advisor could result in enormous financial losses,” Byron wrote. “This danger outweighs any injury Plaintiff might suffer due to the disloyalty of two former employees. Thus, issuance of a preliminary injunction could actively obstruct the public interest.”
A spokesman for Regions declined to comment on the denial or whether it will seek to appeal it.
The judge initially imposed a temporary restraining order after Regions on April 16 accused the advisors of using confidential information to solicit bank clients to move accounts to their new employer, and of exploiting the coronavirus economic crisis by moving when they hoped the court would be unable to operate efficiently.
But he overturned the two-week TRO and rebuked Regions for omitting material information after reviewing affidavits in which the brokers testified they had built their business over many years on their own and had not violated employment contracts and privacy laws by sending certain client information to their personal emails.
In his latest ruling, following a full briefing, he said Regions had failed to prove that the brokers’ announcements of their employment change constituted solicitation under Florida law.
He also adopted some of the brokers’ own arguments about the special needs of clients for advice in the coronavirus market environment
“An injunction in these highly volatile times which takes away the advisors’ cell phones and necessarily chills their responses to clients’ questions out of fear that a response may be misinterpreted as a solicitation…presents enormous harm to investors,” Montalvo and Cárdenas wrote in their affidavits.
In addition to ruling that announcing a move is a permissible practice under Florida law and brokerage industry standards, the judge said Regions failed to show that the cell phone numbers of clients constituted trade secrets and could not be considered property of Regions under state law.
Regions also failed to show that it would suffer “irreparable harm,” a key standard for issuance of a preliminary injunction. The brokers, he wrote, would be the victims of such a finding.
“The issuance of a preliminary injunction will impose extreme costs on defendants—most significantly in the form of reputational injuries,” Judge Byron wrote. “The Court hesitates to brand defendants with an insinuation of wrongdoing without more definitive evidence to that effect.”
Montalvo and Cárdenas were well positioned to transfer their largely international client base because they were accustomed to virtual meetings and using e-signatures for account paperwork, said a person familiar with their transition. (Headhunters have said that one of the few positive aspects of moving in the chaos of today’s markets and virus crisis is that colleagues at former firms cannot be as effectively deployed by managers to try to retain clients.)
Montalvo began his brokerage career in 2002 at SunTrust Investment Services, moved to Wells Fargo’s private bank in 2008, and spent less than a year at Allgen Financial Services before joining Regions in 2015, according to his LinkedIn profile. He was not registered as a broker or investment adviser between 2014 and 2019, according to regulatory records.
Cárdenas started his career at Morgan Stanley in 2010, moved to Wells in 2012 and traced the same moves to Allgen and Regions Bank as Montalvo in 2014 and 2015. Raymond James purchased Regions’ core wealth business in 2012, but the bank’s remaining wealth advisors are registered through a broker-dealer unit of Cetera Investment Services, LLC.
Despite their banking roots, Montalvo and Cárdenas worked on a grid-based payout system rather than a salary-plus-bonus, earning a percentage of the fees they charge clients, according to the source.