UBS Files Injunction Against Departing Advisors

It is being reported by the Investment News that UBS is going after two former financial advisors for allegedly taking client information with them when they left the firm to join a competitor.

According to the report, financial adviser David Kinnear and his partner Kathleen Bakas may have to present their computers and cellphones to the Cook County Circuit Court for inspection and “scrubbing” — if UBS gets its way.

On February 15, UBS asked the Cook County Circuit Court for an injunction against the two advisers pending an expedited arbitration hearing by the Financial Industry Regulatory Authority Inc.

Apparently, UBS is asking the court to take a number of actions. The company wants the judge in the case to bar the two advisers from soliciting their UBS clients to join them at Wells Fargo. UBS also is looking to prevent the pair from using or disclosing any information on UBS clients. In addition, the Swiss company wants the court to order the defendants to return any UBS client records or copies of records they currently possess and to destroy any computerized client records they have.

According to the suit filed, UBS alleges that Mr. Kinnear on multiple occasions downloaded confidential client information and is now using it to solicit his former UBS clients. The information, according to the complaint, includes “year-end statements, performance reports of each client’s investments and other personal financial goals for each client.”  It is unclear at this time whether these particular advisors violated the Protocol (as UBS has alleged) or if UBS is simply attempting to send a message to other advisor contemplating a switch to another firm.

Although lawsuits filed against departing advisers were routine prior to 2004 they have become rarer after most firms adopted the Protocol for Broker Recruiting.

Pursuant to the protocol, advisers are allowed to take a client’s name, address, phone number, e-mail address and the title of the account. However, they are “prohibited from taking any other documents or information.”

It is also possible that the suit filed by UBS is an aggressive move to ensure that these advisors pay back their promissory notes with the firm.  Apparently, UBS also contends that Mr. Kinnear owes the firm some of more than $650,000 in loans made to him as part of a UBS incentive program and that he has violated a client non-solicit agreement that was part of the incentive program.

Certainaly, the size and success of a departing advisor or team can dictate how aggressively broker-dealers enforce the rules of the protocol and pursue recovery of unpaid promissory notes.

The foregoing information is being provided by The White Law Group.  The White Law Group represents financial advisors in various types of securities employment disputes, including issues related to solicitation, recruiting of clients, unpaid promissory notes, and employment discrimination.

To speak with a securities employment attorney, please contact the firm’s Chicago office at 312-238-9650.

For more information on The White Law Group’s securities employment practice, please visit https://whitesecuritieslaw.com/securities-regulation/.