RBC Team Seeks Tit-for-Tat Solicitation Halt Against Morgan Stanley

A $6 million RBC Wealth Management-U.S. team that Morgan Stanley sued last week to inhibit their calling former clients has responded with a counterclaim seeking to prohibit the firm from trying to retain the clients.

The brokers—Wade Martin, Arthur Martin, Zachary Martin and Brett Scharf—argue that Morgan Stanley promised them verbally and contractually that it would not solicit clients they brought with them in 2010 when it recruited them from UBS.

“Promises were made by Morgan Stanley…that their customer relationships were ‘owned’ by Arthur Martin and Wade Martin and that Morgan Stanley would not solicit or interfere with these relationships if they ever decided to resign,” the brokers said in the suit filed Friday in U.S. District Court in the district of New Jersey. “Morgan Stanley is now interfering and attempting to wrongfully take these pre-existing relationships by offering incentives, discounts and inducements to stay.”

The suit also alleges that Morgan Stanley is violating the Financial Industry Regulatory Authority’s 2019 guidance on communicating with former brokers’ customers by telling them Arthur Martin, Wade’s father, had retired rather than left for RBC.

It also accuses Morgan Stanley of defamation by telling clients that they were being overcharged and that some team members lacked expertise.

Brokers trying to jump-start their practices at new firms often complain about former colleagues denigrating them to former customers, and many firms offer price inducements to keep the customers in-house after their advisors leave, but the suit acknowledges that counterclaims by brokers are rare.

“Based on this conduct, Morgan Stanley should be restrained—not Defendants,” the court filing said. “The customers rightfully belong to the Martin Team, and Morgan Stanley should not be permitted to contact and solicit these pre-existing customer relationships.”

A Morgan Stanley spokeswoman cited the firm’s earlier statement that it will “take appropriate legal action to enforce its rights and protect our clients’ information.”

In its initial request for a TRO, Morgan Stanley acknowledged the pre-existing customer agreement with the Martins. But it said the team appeared to go beyond the agreement by taking contact information on new clients and making “rampant” calls to them, as well as taking a presentation prepared for a corporate client. The brokers called a slew of clients in their $600 million book and sent a mass mailing on October 3, the day after they resigned, Morgan Stanley said in its TRO request.

In their claim, the brokers said they “recalled the names of their customers from their memory, obtained their contact information from publicly available sources, and then contacted the customers solely to alert them, as a professional courtesy, that they had left Morgan Stanley and joined their new employer.”

The brokers’ attorney, Thomas B. Lewis of Stevens & Lee, declined to comment.

An RBC spokesperson did not return a request for comment.

Arthur Martin is a 46-year industry veteran who the team now designates a senior financial associate. His son Wade, who has been a registered rep for 32 years, leads the team.