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The Protocol states that when a broker resigns from one firm and moves to another, that broker is entitled to take account information related to clients whom he or she specifically serviced. In other words, the Protocol may protect the broker from being sued for taking that information or soliciting clients by his or her old firm on the grounds of the broker’s employment agreement. In order to achieve protection under the Protocol the broker must follow its provisions carefully. You can attain a copy of the Protocol here.
Interpreting the protocol and what it means for you can be confusing, misleading and convoluted. The best way to protect your interests is to hire competent and experienced legal counsel immediately. The securities lawyers at Lubiner, Schmidt & Palumbo have three decades of experience in the securities industry. Each of our counsel members are intimately familiar with the Protocol and the potential ramifications it can have on firms, brokers, broker-dealers, advisers and registered representatives. Our extensive knowledge and experience can benefit you substantially throughout the legal process.
The First Question – Does the Protocol Apply to Your Firms?The first question you need answered is whether your new firm and your old firm are parties to the Protocol. Founded in 2004, the Protocol is short for the "Protocol For Broker Recruiting." Any firm is entitled to join the agreement, which allows brokers to retain their client list while transitioning from one Protocol-subscribed firm to another. It now covers over 1000 broker-dealer and registered investment advisory firms – from the larges to the smallest.
A list of Protocol members is available for any broker who may be questioning whether he or she has Protocol protection through their particular firm. It is vitally important that you check both the membership of the old firm and new firm. Both firms must belong for the Protocol to apply.
If both firms are members, the next step is to discover exactly what can you do under the protection of the Protocol.
What Can You Do Under the Protocol?The Protocol permits a broker or financial advisor to take the following account information to his or her new firm: client name, address, phone number, email address and account title. The broker can only take that information for the clients whose accounts he or she served. Taking more information—like client Social Security numbers, account numbers or client statements— is a distinct violation of the Protocol and causes the broker to lost protection under it. If you have followed the Protocol, you are entitled to contact those clients and solicit their business once you begin work with a new firm.
To keep the protection of the Protocol, you also have to give your old firm a written copy of the client information that you took. You must give that copy to your branch manager when you resign. Under the Protocol, your resignation must also be in writing.
Who are Your Clients?Not all clients whom you serve are your clients under the Protocol. This is especially true of clients you may serve in partnership with another broker. Whether you are able to treat them as your clients is contingent upon your written partnership agreement. If it is not in writing, the Protocol spells out which clients you are permitted to include in your list and therefore solicit at the new firm. The Protocol states that, if there is no written partnership agreement, and you have been a producing member of the partnership for four years or more, you can take the entire partnership list of clients. If you have been a member of the partnership for less than four years, you can only include those clients that you introduced to the partnership.
If a particular client is part of an agreement with a retiring broker and that broker is receiving payment in some form for the clients’ business, that client may not be yours according to the Protocol’s protection. Whether or not you can list a client as your own is entirely dependent upon what the agreement says.
When Can You Talk to Your Clients About Your New Firm?Under the Protocol, you can solicit your clients’ business for your new firm only after you have resigned from your old firm and begun work with your new firm. That means you cannot tell your clients that you are leaving, nor can you solicit their business before you resign.
The Protocol has allowed many financial advisors to bring their clients with them to their new firms. Financial Advisors who start their own firm can join the Protocol, gaining assurance under its protection.. Before resigning from one firm, the financial advisor must carefully assess their prospective new firm for Protocol protection or must otherwise risk cutting client relationships.
When it comes time for assessing your Protocol protection, know that you need not sail this ship alone. At Lubiner, Schmidt & Palumbo we have helped brokers and firms safely navigate these questions for years. We provide the experience and knowledge of a large firm with the affordability and personable approach of a small firm. At Lubiner, Schmidt & Palumbo we are always prepared to provide you with expert legal support.