Morgan Stanley Looks to Restrain $2.75-Mln Producer in CO and NJ Who Left for UBS
Morgan Stanley has gone to federal court seeking to restrain another departing broker from calling former clients, this time a $2.75 million producer in Colorado and New Jersey who last week left for rival UBS Wealth Management USA.
Crotty, his former firm alleged, had begun soliciting clients, asking them to shift with him to UBS while still a Morgan Stanley employee and he retained confidential client information after his departure. Morgan Stanley was required to seek a temporary restraining order and/or preliminary injunction to keep the advisor from continuing his solicitations pending the outcome of a Financial Industry Regulatory Authority arbitration hearing, the complaint said.
“In the months leading up to this resignation, Crotty’s Outlook calendar indicates that he met with or spoke to over 30 Morgan Stanley clients, including the largest relationship he serviced at Morgan Stanley,” the complaint alleged. “Several clients, including those who appear not even to be identified on Crotty’s Outlook calendar, have confirmed that they were solicited to join Crotty at UBS prior to his departure from Morgan Stanley.”
At Morgan Stanley, Crotty had access to “hundreds” of the firm’s clients, and managed about $540 million in assets generating about $2.75 million in annual revenue, according to the complaint.
A UBS spokeswoman, who had previously confirmed Crotty’s hire, declined to comment on the litigation.
“Morgan Stanley will take appropriate action to ensure that departing employees comply with their legal obligations,” a Morgan Stanley spokeswoman said, declining to comment further on the case or Crotty’s departure.
Crotty, who at UBS works primarily from its Boulder office, managed by Tyler Hutchens, also uses the wirehouse’s office in Manasquan, New Jersey, as much of his client base is located in the New York-New Jersey area, a source familiar with the move said. Crotty had maintained offices in Boulder and Shrewsbury, New Jersey while at Morgan Stanley, according to the firm’s complaint.
Morgan Stanley alleges that Crotty, who was permitted to work primarily from Colorado, had as recently as June 14 traveled to New Jersey to meet with clients there. Following his July 9 exit, four of those clients reported to Morgan Stanley that Crotty informed them he was leaving for UBS and/or a new firm while still employed by Morgan Stanley, the complaint said.
“[I]t is clear that Crotty returned to New Jersey, for the purpose of meeting with and soliciting clients on behalf of UBS, even before he resigned,” the complaint said. “Crotty even had the audacity to submit his travel expenses, and the expenses he incurred meeting with clients, to Morgan Stanley for payment, even though he incurred all these expenses for the purpose of diverting Morgan Stanley clients to a competitor.”
Crotty did not respond to a request for comment sent through social media. He began his career in 1995 with Fidelity Investments Institutional Services Company and in 1997 joined Merrill Lynch for roughly a decade before joining Morgan Stanley, according to his BrokerCheck report.
Morgan Stanley also noted in its complaint that Crotty had entered into “various” joint production agreements, wherein he and other advisors agreed to service together Morgan Stanley clients. By entering those agreements, Crotty also agreed to abide by firm policies that called for issuance of injunctive relief in order to enforce non-solicitation and confidentiality provisions, the complaint said.
Those policies governing joint production agreement participants provide that any information, including “the names, addresses, telephone, e-mail or any other identifying numbers and financial information” of any client accounts, are “confidential and the sole and exclusive property of Morgan Stanley,” the complaint continued.
Morgan Stanley in January was successful in blocking a New Jersey team with $6 million in annual production from encouraging their former clients to join them at RBC Wealth Management-U.S. That January litigation followed a lull in non-solicitation and trade secret suits against defecting brokers filed by Morgan Stanley during the prior year.
Meanwhile, at least two of Morgan Stanley own recruitments of large teams have landed in court in recent months. A $4 million-producing team in Garden City, New York that had joined from UBS in April agreed the following month to a customer solicitation ban. In December, it was on the receiving end of a temporary restraining order a judge granted against a $14 million team in Boca Raton, Florida, that had also joined from UBS.
Both UBS and Morgan Stanley in 2017 withdrew from the Protocol for Broker Recruiting, which permits advisors to retain some client-contact information when moving to signatory firms and is aimed at reducing litigation.
UBS and Morgan Stanley, which both had pushed to reduce hiring expenditures and retreated from broker recruiting in 2016 and 2017, respectively, have in the past 18 months revived their broker efforts and been swapping high-end teams.