Morgan Stanley Utah Broker Agrees to Stop Contacting Ex-Clients at J.P. Morgan Private Bank
A Morgan Stanley broker whose $7 million team left J.P. Morgan Private Bank in Salt Lake City, Utah this spring has agreed not to contact his former clients as J.P. Morgan continues to flex its legal muscle against departing bankers.
Under the order, Smith, formerly an executive director at the private bank, is prohibited from directly or indirectly soliciting clients and using or disclosing any confidential information as defined by the bank’s code of conduct. The previously unreported injunction was finalized May 27 and marks at least the second time J.P. Morgan has taken a former banker or team to court amid over a dozen departures in the past year.
The order, which does not prohibit Smith from accepting in-bound calls or working with customers who have already transitioned their business, will remain in effect until a Financial Industry Regulatory Authority arbitration panel rules on J.P. Morgan’s request for permanent injunctive relief and damages, according to the order. As of Monday morning, there was no indication on the court docket of a decision in arbitration.
Smith, as well as his Salt Lake City-based attorneys, Lara Swenson and Mitchell Stephens, did not respond to requests for comment.
The agreement did not constitute an admission of wrongdoing, and the court did not make findings or any determination as to liability or whether Smith had violated his employment agreements, according to the order.
Spokespeople for J.P. Morgan and Morgan Stanley both declined to comment.
Smith, who had started his career in 2011 at J.P. Morgan, left the private bank along with managing director Brian R. Swenson, investor associate Jesse F. Bohannon, and two support staffers. They oversaw a total of $2.8 billion, sources said at the time. None of the other team members were named in J.P. Morgan’s complaint.
J.P. Morgan had accused Smith of reaching out to at least nine former clients by email or phone, asking to meet or move their assets to Morgan Stanley. The firm also claimed that Smith in at least one instance told a former customer that the J.P. Morgan team was only compensated on new money brought in and that “service goes downhill” once you’re a client.
J.P. Morgan also said it believed that Smith had taken confidential client information, including phone numbers and email addresses, which he used to contact customers.
Smith had served about 54 J.P. Morgan households, “the majority of which were either pre-existing JPMorgan clients at the time they were assigned to Smith, or were developed by Smith at JPMorgan with JPMorgan’s assistance,” according to the complaint.
The firm also claimed that Morgan Stanley had provided to Smith “substantial financial inducements” of more than $1 million in guaranteed loans and other incentives, in order to entice him to leave the private bank.
J.P. Morgan’s legal efforts coincide with what headhunters say is an increasingly competitive market for private bankers as Morgan Stanley, UBS Wealth Management USA and even registered investment advisory firms vie for those advisors. The salaried banking pool had historically been a less enticing market for traditional firms given garden leave requirements, the challenge of transferring customers with deep banking ties and strict one-year customer solicitation bans.
J.P. Morgan Private Bank earlier this month obtained a similar non-solicitation agreement from a private banking duo who joined UBS in Fort Worth, Texas.
The bank has also been pursuing a years-long arbitration and court case against a Chicago registered investment advisory firm, Cresset Asset Management, and a senior executive over its “raid” on bankers.