Morgan Stanley Sues $6 Million Team at RBC over Client Calls

Morgan Stanley Wealth Management on Wednesday revived its pursuit of big teams it accuses of illegally calling former clients, suing a $6-million team of New Jersey advisors who joined RBC Wealth Management in early October.

Wade Martin, Arthur Martin, Zachary Martin and Brett Scharf ignored numerous demand letters asking for return of confidential client information and of proprietary presentations, requiring Morgan Stanley to seek a preliminary injunction and/or temporary order restraining the advisors from continuing their “rampant” client solicitations pending the outcome of a FINRA arbitration hearing, according to a complaint filed in U.S. District Court in New Jersey.

A spokeswoman for Morgan Stanley declined to comment on whether the suit represents a return to a more zealous enforcement of non-solicitation and trade secret clauses in broker employment contracts or reflects what it considers egregious contractual violations particular to the team. The wirehouse brought more than a dozen legal cases in the months following its late 2017 withdrawal from the Protocol for Broker Recruiting, but has eased litigation in the last year as it re-upped its recruiting from other firms.

The complaint and attached filings say Arthur Martin and his son Wade were allowed to retain contact information on clients serviced before they left UBS to join Morgan Stanley in 2010, but appeared to also take confidential financial information and may have violated privacy laws by sharing it with nonregistered third parties. The team includes five associates of the advisors.

The lawsuit also asserts that Wade Martin emailed to himself eight days before the team’s mass resignation a confidential document on structured legal settlements entitled “Chubb Presentation.”

In a more common assertion, Morgan Stanley said the team appears to have taken contact information on clients that it was not entitled to as a result of the firm’s exit from the Protocol. It cites overnight mail sent to “many and perhaps most” of the team’s more than 300 client relationships on the “same day they resigned.”

It is unlikely the contact information came from publicly-available sources, the complaint said.

The Martin team, which managed over $600 million in client assets at Morgan Stanley, had transitioned over $200 million to RBC as of this week, according to the lawsuit. The team includes five client associates.

“Morgan Stanley will take appropriate legal action to enforce its rights and protect our clients’ information,” a company spokeswoman said in an emailed statement.

A spokesperson for RBC did not immediately return a request for comment.

“Defendants continue to violate flagrantly their legal commitments, leaving Morgan Stanley with no choice but to seek assistance from this court,” lawyers at Kraemer Burns in Springfield New Jersey and at Coss & Momjian in Bala Cynwyd, PA, wrote in the complaint.  The lawsuit accused the brokers of breaches of contract and of their duty of loyalty, along with unfair competition.

Arthur Martin, now a senior financial associate, began his brokerage in 1974 at UBS and its predecessor PaineWebber, according to his BrokerCheck history. Wade started almost 33 years ago at UBS, and Zach, his son, joined Morgan Stanley when he first registered as a securities salesperson in 2019. Scharf began his brokerage career seven years ago at UBS.

None of the advisors have disclosure marks on their BrokerCheck records.

If a judge issues a TRO or preliminary injunction, the case would be heard on an expedited basis by arbitrators within two weeks. If the request is denied, hearings would not typically be scheduled for nine to 12 months, according to the complaint.

Morgan Stanley was on the receiving end of a temporary restraining order a judge granted last month against a $14 million team in Boca Raton, Fl, that joined UBS.