Brokerage Firm Protocol for Broker Recruiting

In an effort to curb the litigation that occurs when financial advisors move from one broker-dealer to another, in 2004 three of the largest brokerage firms (Merrill Lynch, Citigroup, and UBS Financial Services formed the Protocol for Broker Recruiting (the “Protocol”).

The Protocol is an agreement among a group of securities industry competitors to refrain from enforcing non-competes against brokers who move between signatory firms. Since its implementation, many small and medium sized broker-dealers have embraced the Protocol, smoothing brokers’ transition from firm to firm.

In fact, membership in the Protocol includes almost 550 firms, including the majority of the largest wire houses. Most surprising though is the trend of smaller broker-dealers joining the Protocol to obtain the secondary benefit that the Protocol provides – protection and predictability when hiring financial advisors.

The Protocol is an agreement that essentially eliminates costly litigation by and between its participants. If a financial advisor leaves a member firm to join another member firm and follows the provisions set forth in the Protocol, there should not be any litigation against the broker or hiring firm. The provisions of the Protocol establish a procedure for transitioning between firms that, when followed, saves the recruit and his new firm from legal fees, an injunction, a possible damages award, and the uncertainty inherent in litigation.

Under the Protocol, prior to resigning, the financial advisor should prepare two lists: the first containing his or her customers’ names, addresses, telephone numbers, email addresses and account types; the second containing all the information in the first, plus client account numbers.

The financial advisor must resign in writing to someone in management. When the financial advisor resigns, the advisor should provide the customer list containing the account numbers to someone in management with their resignation letter. Again, the list provided to management should include account numbers even though the list being taken does not. The financial advisor can then take the other list to their new firm and use it to solicit customers to transfer their accounts. The Protocol provides that only the financial advisor is permitted to use the list taken from the old firm.

If a firm participates in the Protocol and counsels its recruits (who must also be coming from a Protocol firm) to follow these procedures, neither the firm nor its recruit will have to contend with any lawsuits or liability for claims such as breach of a non-solicitation agreement or misappropriation of trade secrets. In addition to limiting the likelihood of litigation, the Protocol is intended to eliminate an injunction prohibiting the recruit from contacting his or her clients, as well as any claim for damages associated with the old firms loss of business when clients.

As such, the primary benefit of the Protocol is that is saves firms the expense of litigation, it eliminates the uncertainty for a financial advisor regarding whether the recruit will be subject to an injunction and it allows the recruit to solicit their customers to transfer their accounts to his/her new firm.

Although the Protocol does eliminate certain litigation claims associated with broker movement, it does not eliminate all potential litigation. Litigation associated with one broker moving to a new firm includes: pre-resignation solicitation, claims for amounts due under promissory notes, claims for training costs, claims for violations of the Protocol, and raiding claims arising from group hires.

The onus is now on the hiring manager to make sure the financial advisor being recruited understands the Protocol and follows it to the letter.

If you are a financial advisor involved in litigation as a result of your alleged failure to follow the Protocol, the securities attorneys of The White Law Group may be able to help.

The White Law Group, LLC is a employment and securities employment law firm with offices in Vero Beach, Florida.  The firm represents financial advisors in various employment related matters throughout Indian River County and the nation.

For more information on The White Law Group’s securities employment practice, please visit

U-5 Defamation Attorney

Are you a financial advisor with an erroneous U-5 entry? Do you need an experienced securities employment attorney to help you clean up your employment record? If so, The White Law Group may be able to help.

As FINRA has stepped up its regulatory functions in recent years, broker-dealers are now feeling the heat to report everything to assure compliance with both U-4 and U-5 disclosure requirements. This has resulted in brokerage firms disclosing the most innocuous details regarding an employee’s departure from the firm. These details can have a significant impact on a financial advisor’s ability to find employment with another broker-dealer. Even a simple “Yes” indicating a pending investigation at the time of termination can negatively affect a broker’s ability to get a job with a new firm. Additionally, if these statements are not completely accurate, they may lead to legally viable claims for defamation, wrongful termination, retaliation, or discrimination.

The White Law Group represents brokerage firm employees whose former employers improperly placed derogatory or inaccurate statements on their U-5 termination forms. To speak with a securities employment attorney regarding your legal rights, please call the firm’s Vero Beach office at 772-242-9330.

The White Law Group, LLC is a national securities arbitration and securities regulation/compliance law firm with offices in Chicago, Illinois and Vero Beach, Florida.

For more information on The White Law Group, please visit our securities website at

Are you a Financial Advisor in need of an Attorney for an Employment Dispute

Are you a financial advisor with an employment dispute with your former employer?  If so, The White Law Group may be able to help.

The White Law Group has experience with all types of securities employment disputes.  Typical types of securities employment disputes include, but are not limited to:

1. Wrongful termination – Although most financial advisor’s are at-will employees that can be terminated for any or no reason, if the stated reason for the termination given by the brokerage firm is inaccurate, this may raise a claim for wrongful termination.

2. Promissory note litigation – Most brokerage firms use Promissory Notes as a recruiting tool.  However, if an advisor leaves before the terms of the Note are fulfilled, brokerage firms often sue the advisor for collection of the outstanding balance owed on the Note.

3. Defamation – Defamation is any intentional false communication, either written or spoken, that harms a person’s reputation.  In the securities arbitration context, such defamation includes an inaccurate mark on an advisor’s U-4/U-5.

4. Retaliation /whistleblower claims – If a broker-dealer terminates an employee for reporting a compliance violation or some other unlawful or unethical activity (or stopping this employee from doing so), this can be grounds for a retaliation or whistleblower claim against the firm.

5. Solicitation / raiding claims – Such claims generally involve the recruitment of brokers from one firm to another and usually includes the firm losing the advisors to sue the acquiring firm.  Often times the advisors are caught in the middle and they may even need separate representation (apart from the attorneys hired by their new firm) to ensure that their interests are protected.

6. Tortuous interference with a business relationship – If a former employer is interfering with your ability to make a living or to work with a particular client, you may have a claim for tortuous interference with a business relationship.

7. Discrimination – Discrimination can include age discrimination, gender discrimination, and racial discrimination.  Discrimination based on age, gender, or race is prohibited by Federal Statute and is certainly actionable.  Such claims often include a separate charge made with the Equal Employment Opportunity Commission (EEOC) prior to bringing a FINRA arbitration claim.

Securities employment disputes are governed by the FINRA Code or Arbitration for Industry Disputes.

FINRA Rule 13200 states that except as otherwise provided in the Code, a dispute must be arbitrated under the Code if  the dispute arises out of the business activities of a member or an associated person and is between or among: Members (i.e. broker-dealers); Members and Associated Persons (i.e. financial advisors); or Associated Persons.

As such, if you are a financial advisor with an employment dispute involving your former employer, it is likely that the case will need to be arbitrated through FINRA’s Dispute Resolution.

One exception is if the matter involves discrimination claims, including sexual harassment.  FINRA Rule 13201 states that a claim alleging employment discrimination, including sexual harassment, in violation of a statute, is not required to be arbitrated under the Code.  Such a claim may be arbitrated only if the parties have agreed to arbitrate it, either before or after the dispute arose.

FINRA arbitrations usually take between 12-15 months from the date of filing and depositions are strongly discouraged, making the process generally faster and less expensive than litigation filed in Court.

Since securities employment disputes are usually handled through FINRA arbitration, it is important to hire an experienced FINRA securities employment attorney who is familiar with the nuances of FINRA arbitration (versus Court litigation).

The White Law Group is a national securities arbitration, securities regulation, and securities compliance law firm.  The firm has offices in Chicago, Illinois and Vero Beach, Florida. The firm’s lawyers have extensive experience in securities employment disputes, including previous experience representing some of the world’s largest broker-dealers.

If you believe you have a question about a securities employment matter, please contact a securities employment lawyer with The White Law Group by contacting the firm’s Vero Beach office at 772-242-9330..

For more information on The White Law Group, please visit the firm’s website at