Welcome to Financial Advisor IQ
Follow

Morgan Stanley Wins TRO Against Broker Who Fled to Wells Fargo

By Miriam Rozen July 9, 2019

A federal court issued a temporary restraining order this month against one of Morgan Stanley’s former financial advisors, James N. Washington II, an eight-year veteran who defected last month to Wells Fargo Advisors, barring him and his new colleagues from soliciting his ex-employer’s clients.

Washington agreed to a stipulated TRO after Morgan Stanley filed a lawsuit alleging that on June 27, the same day Washington resigned from Morgan Stanley’s Potomac, Md. office, he "showed up unannounced at a board meeting for a Morgan Stanley client he formerly serviced, a meeting he was aware of only by virtue of his Morgan Stanley employment."

According to Morgan Stanley’s lawsuit’s allegations Washington, who joined Wells Fargo in its Bethesda, Md. office, "proceeded to advise the client they had a CD coming due, again information he knew solely by virtue of his Morgan Stanley employment, and then solicited the client to join his new firm."

A Morgan Stanley spokesperson declines to comment about the litigation.

A Wells Fargo spokesman wrote in an email: “We’re pleased Mr. Washington has chosen to join Wells Fargo Advisors.”

Washington’s lawyer, Daniel J. Donovan of Baltimore’s Donovan and Rainie, declined to comment.

As FA-IQ previously reported, federal courts have granted more often than denied requests by Morgan Stanley for temporary injunctions targeting defecting financial advisors since October 2017.

That was the month Morgan Stanley surprised the industry by announcing it was withdrawing from the Protocol for Broker Recruiting Agreement — the first major wirehouse to do so. Morgan Stanley and other broker-dealers inked that Protocol deal and remained in it for 13 years to allow departing FAs to take some client data with them without the threat of a lawsuit.

In the nearly 21 months since it announced its departure, Morgan Stanley has filed 14 cases in federal court seeking temporary restraining orders barring defectors from soliciting Morgan Stanley clients and using proprietary material, according to federal court records.

In seven of those federal cases, the courts have granted Morgan Stanley’s request for the TROs; in two instances the wirehouse’s request was denied, and in five of the cases the two sides reached a settlement prior to the court ruling.

(Getty)

Morgan Stanley has probably been as successful in securing TROs against defectors in the uncounted state court cases it has filed as it has been in federal forums, according to two lawyers who have defended defecting financial advisors against the wirehouse but who also represent other broker-dealer employers pursuing their exiting advisors.

The vast majority of FAs who leave Morgan Stanley never draw the legal ire of the wirehouse, one of those lawyers, Anthony Paduano of New York’s Paduano & Weintraub, told FA-IQ previously.