Wells Broker Leaves for LPL, Sues to Fend Off TRO
A broker in San Diego who resigned last week from Wells Fargo Advisors to start an independent broker and advisory practice has preemptively sued the firm to prevent it from trying to stop him from soliciting Wells clients.
“In the last several years, Wells Fargo has lost hundreds, if not thousands, of financial advisors following the seemingly unending parade of scandals plaguing the firm,” says the complaint filed in U.S. District Court in the southern district of California by March’s lawyers at Shustak Reynolds & Partners. “This has caused Wells Fargo to become increasingly hostile in its treatment of departing advisors, including advisors who leave pursuant to the terms of the Broker Protocol.”
The complaint cites a single lawsuit Wells filed in August seeking a restraining order against brokers who joined RBC Capital Markets.
March’s complaint seeks a declaratory judgment and temporary injunction absolving him of violating “trade secret” protection laws and his employment agreements, arguments firms typically cite when seeking to retain clients of departing brokers in the early days of setting up their new practices.
“Defendant is not entitled to a temporary restraining order, preliminary injunction, permanent injunction or other injunctive or monetary relief against Plaintiff related to his transition to a new firm, his announcement to his clients of his new affiliation, and his solicitation of clients to move their accounts to his new firm,” said the suit.
A Wells Fargo spokeswoman declined to comment on the lawsuit.
March, a solo practitioner who left with a registered client associate, markets himself in online biographies as an “institutional consultant” providing “corporate asset and liability management” to clients. He works from both San Diego and Wheatland, WY, according to his complaint-free BrokerCheck history.
Neither he nor his lawyers responded to requests for comment.
The 38-year veteran advisor, who had worked at Wells and predecessor firm Prudential Securities since 1995, asked the California court to declare unenforceable any attempt by Wells to include Protocol data as a trade secret. The Protocol permits brokers to take five basic pieces of customer-contact information with them to another signatory firm without fear of being sued.
The complaint, which also seeks damages and legal costs, does not explain what prompted March to file the preemptive litigation, other than its allegation that Wells Fargo Advisors is defensively circling the wagons because of the outflow of brokers since Wells Fargo Bank disclosed fake account scandals four years ago. Wells’s brokerage count fell a net 815 in the year ending October 30.
Wells “recently” prohibited March from using a “Needs-Based Analysis” he developed in the 1990s, according to the lawsuit, which did not elaborate on whether he and the firm are disputing his ownership rights to the software. March also offers his corporate clients a trademarked Structured Asset Management Systems process for “dynamic real-time ‘fiscal’ checkups,” according to his former Wells Fargo website.
An employee’s filing for preemptive relief is an aggressive legal strategy used primarily to win a hearing in a labor-friendly jurisdiction, according to employment lawyers, although that explanation may be superfluous since March and Wells Fargo & Co. are both California-based.
“A proactive, preemptive strike to get a ruling that the Protocol applies…speaks to the degradation of observance of the Protocol and whether you can rely on good-faith compliance on both sides,” said Sharron Ash, a lawyer at Hamburger Law in New Jersey. “An advisor’s best and less costly defense is to understand the rules and be sure to comply on the way out the door.”
Ash, who specializes in helping brokers move to independent registered investment advisory firms, is not involved in the March case.
“Anytime a plaintiff files a claim, the burden of proof is on the plaintiff,” said another lawyer who spoke on condition of anonymity because he has represented Wells Fargo. “It’s a very interesting strategy but it might be hard to show why [March] should get any type of relief.”
Two former Morgan Stanley brokers in San Diego filed a preemptive suit to prevent the wirehouse from handcuffing their customer solicitation attempts after they joined Hilltop Securities in 2018, but subsequently dismissed the litigation. Morgan Stanley, unlike Wells and LPL, has not been a member of the Protocol since the end of 2017.