Morgan Stanley Is Strategically Withdrawing TROs
A lawyer representing recent Morgan Stanley breakaways says the wirehouse’s filing for a temporary restraining order against the team — and the subsequent withdrawal of the order — were meant as warnings to others thinking of leaving, WealthManagement.com writes.
Last month Morgan Stanley withdrew its motion for a TRO and a preliminary injunction against a team of eight reps led by Patrick O’Neill, who had left earlier in February. Now David Gehn, an attorney at Ellenoff, Grossman & Schole representing O’Neill’s team, tells the web publication the motion was “a complete waste of time and money” in the first place. According to Gehn the wirehouse failed to respond with any substantive detail to his emails while Morgan Stanley lawyers didn’t respond to his phone calls, WealthManagement.com writes.
A simple phone call between the two sides’ lawyers would have saved time and money, he tells the web publication. But the real intent of Morgan Stanley’s motion was to make the fight public, which was “damaging” to O’Neill and his team and would potentially scare off other advisors, Gehn tells WealthManagement.com.
Scott Matasar, a securities litigation, enforcement and regulatory attorney at Matasar Jacobs, tells the web publication the wirehouse is filing the cases “to send a message” that it’s “going to have zero tolerance for advisors that try to leave and take their book with them.” Morgan Stanley didn’t respond to the web publication's requests for comment.
Morgan Stanley, along with UBS and Citigroup, recently pulled out of the Protocol for Broker Recruiting, the industry accord that allows departing advisors to take some client data with them without threat of a lawsuit.
Morgan Stanley and UBS have been going after brokers jumping ship ever since — but three recent cases demonstrate that advisors can win the legal battle, InvestmentNews writes. What determines the chances of their success is how they handle confidential client data, Brandon Reif, an industry attorney, tells the publication.
“The brokers and their recruiting firms are becoming more careful in the departure process to better protect client data,” he tells InvestmentNews. “This strategy will lead to less restraining orders.”