Merrill Sues RBC Brokers Who Allegedly Used iPads to Photograph Client Lists
Merrill Lynch asked a federal court in Maryland to stop a three-advisor Annapolis-based team, who left last week for RBC Wealth Management, from soliciting clients and to order them to return any customer contact information they took to their new firm.
Both Merrill and RBC participate in the Broker Protocol, a pact that allows brokers who jump between signatory firms to take limited customer information and contact their former clients. Merrill, however, claims that the team has invalidated the agreement’s protections by using personal iPads to take photos of detailed customer account information including account holdings, information on assets held outside of Merrill, asset flows, and information regarding insurance and annuity products for clients that would not have been allowed by the Protocol.
“Defendants engaged in a concerted effort to surreptitiously bypass Merrill’s security systems and steal a voluminous amount of client information beyond that permitted by the Protocol,” Merrill argued in the complaint.
The wirehouse also accused the team of soliciting 13 customers referred to them by its parent Bank of America even though they are exempt from the Protocol’s protections.
The complaint, which claims the brokers breached their employment agreements, misappropriated trades secrets, and engaged in unfair competition, asks the court to impose the restraints until the outcome of a Financial Industry Regulatory Authority arbitration.
An RBC spokesperson did not respond to a request for comment. Scott Wallace and the other team members did not respond to a call to the office or emails.
Merrill’s claims on the bank-referred customers mirror those it made in early April in a separate case in which the firm succeeded in persuading a Tennessee state court judge to block a Wells Fargo Advisors team from contacting lead-and-referral customers. (The Chancery Court judge in Davidson County ruled those brokers could still solicit the rest of their client base.)
In the more recent case, Merrill said it uncovered the Wallace team’s use of iPads from an unidentified member of the team who ultimately decided not to resign along with the advisors, “in part due to discomfort” with their alleged “scheme.” The person then “advised Merrill of the Defendants’ plan,” the complaint states.
The complaint, which said Scott Wallace purchased the iPads, also cited a text message from one team member instructing others to “‘take pictures of any annuity systematic withdrawals that are set up,’” according to the complaint. The photos were of their remote workstations as they were working from home due to the pandemic, Merrill said.
Merrill, unlike its wirehouse rivals UBS and Morgan Stanley, both of which withdrew from the Protocol in 2017, has sought many fewer TROs against defectors than those two, recruiters and lawyers have said.
The two recent cases seem to show Merrill is stepping up its enforcement of bank referral contracts, but it also appears to only be filing in cases where it believes there are aggravating circumstances.
“Something happened here that was egregious,” said one recruiter, who spoke on condition of anonymity because he works for Merrill. “They don’t file these to lose cases.”
A Merrill spokesperson declined to comment on the litigation.