Transitioning to a New Broker-Dealer

Perhaps, you are just seeking a voluntary change or maybe your current employer is downsizing and you are forced to look for a new position. No matter the reason, it is imperative that you retain knowledgeable legal counsel to guide you through the process. At Lubiner, Schmidt & Palumbo, our securities attorneys have been assisting financial advisors in their transitions from one broker-dealer to another for decades.

Why? Almost all financial advisors are required to sign employment contracts as well as many other loaded documents at the onset of their employment. These documents likely contain consequences and legal ramifications of which you may not be aware. Once you leave the firm, the ramifications enclosed within these documents outlive your separation from employment, often adding unwanted stressors during your transition.

Common examples of such restrictions include repayment of training costs, restrictive covenants, unauthorized possession or use of confidential information, unauthorized possession or use of trade secrets, promissory note repayment, retirement/sunset program obligations and non-solicitation agreements.

It is important to plan accordingly to minimize the adverse consequences of transitioning to new employment. At Lubiner, Schmidt & Palumbo, we can advise you on the best plan of action, help you overcome any obstacles and facilitate a smooth transition into your new employment.

A contractual agreement of which you must be particularly vigilant is the Protocol. Although this contractual agreement is between firms and not between employers and employees, its consequences when transitioning to new employment can be significant.

In 2004, Merrill Lynch, UBS PaineWebber and Smith Barney signed the Protocol for Broker Recruiting (better known as “The Protocol”). The Protocol was implemented in an effort to reduce the employment litigation that routinely ensued whenever a registered-representative changed wire-houses. Since that time, many additional firms have signed the Protocol and have agreed to be bound by its terms.

At first blush, you may think that the Protocol insulates you from being the target of a post-employment action by your former employer. However, you may be mistaken. If you plan to leave a Protocol firm to join a non-Protocol firm, you will not be covered by the Protocol. Similarly, if you plan to leave a non-Protocol firm to join a Protocol firm, you will also not be covered by the Protocol. Additionally, while the Protocol addresses retention of certain customer information and subsequent customer solicitation, it does not cover solicitation of other former employees or solicitors.

The protocol is a convoluted instrument with confusing implications. For all of the reasons listed above and numerous more, you should hire an experienced securities lawyer prior to making any move. Lubiner, Schmidt & Palumbo stands ready to meet with you for a consultation. Let us assist you in making your transition as seamless and stress free as possible.