A recently terminated Edward Jones financial advisor, who managed more than $142 million in client assets from its San Carlos, Calif. office, last week filed a brief opposing his former employer’s attempt to get a federal court to issue a temporary restraining order. Edward Jones is seeking the order to bar the advisor from contacting or disclosing to anyone else his former clients pending a Finra arbitration.
In the litigation, the sparring has grown particularly bitter between the financial advisor, 58-year-old Paul Delzio, and Edward Jones. The firm — with offices nationwide — has never participated in the Protocol for Broker Recruiting, which allows advisors to take some client information with them if they switch employers.
Historically, Edward Jones has taken aggressive legal actions to stop defectors from taking client information when they exit, according to lawyers and recruiters.
In the legal battle between Edward Jones and Delzio, who worked at the firm for three years, there are even allegations that compliance staff members rooted around Delzio’s briefcase without his permission.
In his opposing brief, filed in Northern California federal court, Delzio alleges Edward Jones compliance staff members asked him to come in mid-August to an Edward Jones’ office in Tempe, Ariz., to question him about client emails and a compliance-related issue.
In preparation for that meeting, he printed out lists with clients’ emails “to familiarize himself with his client relationships and track record in the event that he found [him]self without a job as a result of the compliance inquiry,” according to Delzio’s brief.
During the Tempe meeting, the compliance staff members at one point asked Delzio to leave a conference room, his brief alleges. While he was absent and without asking his permission beforehand, the staff members opened his closed briefcase and took client emails from it, Delzio’s brief alleges. The compliance staff members’ actions were “brutal” and “inappropriate,” Delzio’s brief argues.
When he returned to the conference room, the compliance staff members told Delzio he had been terminated, according to his brief.
For its part, Edward Jones in its complaint against Delzio alleges that he took trade secrets and proprietary information, including client information. His termination, according to what the firm has reported on BrokerCheck, was due to a violation of Edward Jones’ policies including those governing emails. In its complaint, the firm alleges Delzio attempted to solicit Edward Jones clients and get them to terminate their ties to the firm — all allegations Delzio denies.
“We sought a temporary restraining order from the court to address Delzio’s violations of the employment contract he entered into with Edward Jones. We expect the case to be resolved soon,” an Edward Jones spokesperson wrote in an emailed statement in response to an inquiry for this story.
The firm is represented by outside counsel at JRA Law Partners in San Francisco and Greensfelder, Hemker & Gale in St. Louis.
Sylvia Scott, a lawyer at Los Angeles’ Holmes, Taylor, Scott & Jones, represents Delzio and did not respond to an emailed inquiry for this story.
“Historically, they have fiercely defended their rights to go after advisors,” says Danny Sarch, a recruiter and president of Leitner Sarch Consultants, says about Edward Jones.
Edward Jones also historically has not asked advisors it hires to bring their book of business with them from previous employers, which means the firm can argue to courts that it has “clean hands” when it pursues defectors it alleges are taking client information with them, Sarch says.
“But it doesn’t mean they will win in this,” Sarch adds.
Thomas B. Lewis, an attorney with Stevens & Lee in Lawrenceville, N.J., has represented both brokers and their employers in recruiting-related litigation, including former Edward Jones brokers. “They cannot take a Protocol spread sheet and they have all said a one-year non-solicit agreement,” Lewis says about exiting Edward Jones brokers.
As a rule, Edward Jones has “a strong argument” against defectors taking clients with them based on its employment agreements and because its advisors are generally “homegrown,” Lewis says. Most start their careers in the industry at Edward Jones and “they build everything at the firm,” Lewis says.
An advisor leaving Edward Jones should not, based on its employment agreements, “have client lists in his possession,” Lewis says.