UBS Seeks TRO Against Defector Who Led $7.6-Mln Team to RBC
For the second time in less than a month, UBS Wealth Management USA has gone to court to seek a temporary restraining order against a defector, this time a Princeton, New Jersey broker who led a seven-person team to RBC Wealth Management-U.S.
UBS alleges that Michael Gara “egregiously” violated non-solicitation and confidentiality agreements while still employed at UBS by pre-soliciting customers and that he has continued to contact clients about transferring assets since his May 7 resignation, according to UBS’s complaint filed on Friday in U.S. District Court in New Jersey.
By Thursday, May 27, UBS said it had received requests from Gara’s clients to transfer $744 million in assets, almost half of the team’s $1.58 billion book. The group had been generating around $7.6 million in revenue, UBS said.
“UBS has attempted on numerous occasions to obtain assurances that defendant will cease soliciting clients and return its confidential client information but has been repeatedly ignored,” the firm wrote. “Instead, Defendant continues to flagrantly violate his legal commitments, leaving UBS with no choice but to seek relief from this court.”
The wirehouse’s proposed TRO seeks an enforcement of its one-year customer solicitation ban as well as return of any customer contact information that Gara may have printed or emailed to himself in the last six months with the firm. The order would be in effect pending the outcome of an arbitration request for a permanent injunction and damages.
Neither RBC nor Gara, a 24-year industry veteran who UBS said was personally responsible for $3.56 million in revenue, returned requests for comment.
The complaint comes weeks after UBS filed for a similar order against a Garden City, New York team that oversaw roughly $700 million in client assets and moved to Morgan Stanley. The brokers in that case stipulated to an agreement with UBS to abide by a customer solicitation ban pending the outcome of a Finra hearing.
As in the earlier case, UBS spotlights the recruiting offers that the brokers received. It notes that Gara alone was awarded $7 million to join RBC as part of a deal that included an upfront bonus of 180% in addition to a 150% ‘back-end’ award if the team hit asset and revenue targets.
UBS said it launched an investigation of Gara’s old office, email accounts, calendar and print logs “in light of the significant number of transfer requests” it received “mere days” after the team’s departure.
In his final weeks at UBS, Gara “scheduled telephonic meetings with numerous UBS clients purportedly for a ‘review’ of their accounts and performance,” but the “true purpose” was to pre-solicit the customers to move to RBC, according to UBS. Gara’s calendar reflected 14 appointments with their largest clients who had altogether assets of more than $85.6 million, UBS said.
“Leaving nothing to chance, Gara and the team spent the weeks and months leading up to their May 7 resignation gathering confidential client documents and information, scheduling post resignation calls and meetings with key clients to solicit and secure commitments to move their accounts to RBC, and taking printed out lists of highly confidential client information, with no regard whatsoever for their duty of loyalty, contractual agreements, UBS firm policies, or the law,” the UBS complaint states.
Moreover, Gara attempted “to undermine UBS’s efforts to retain the clients” by directing customers not to communicate with UBS following his resignation, according to UBS’s complaint.
Following the move, a client emailed Gara at his UBS address, stating: “I am still ignoring all of his note [sic] as you recommended,” according to the complaint.
After Gara left UBS, he and his team members–none of whom are named in the complaint–allegedly continued to call clients, UBS said, pointing to emails customers had mistakenly sent to the team’s former UBS email accounts that referenced the calls.
A UBS spokesperson declined to comment on the litigation or whether it reflects increasing enforcement of its customer contact bans. The wirehouse in 2017 withdrew from the Protocol for Broker Recruiting, the industry hiring pact that permits brokers to contact former clients when changing firms.