Reps Risk Criminal Charges for Taking Records

Could brokers be criminally liable for taking client records? Although industry lawyers know of no cases presently, they say it's a possibility under the Gramm-Leach-Bliley Act (GLB). To address privacy concerns, the law makes it a federal, criminal offense to remove confidential client information from a financial institution without the advance written permission of the customer. But securities

Could brokers be criminally liable for taking client records?

Although industry lawyers know of no cases presently, they say it's a possibility under the Gramm-Leach-Bliley Act (GLB).

To address privacy concerns, the law makes it a federal, criminal offense to remove confidential client information from a financial institution without the advance written permission of the customer. But securities lawyers say the law could cause problems for brokers who are sued for taking customer information to a new employer or using client contact information to announce a departure.

“It will be interesting to see how [GLB] plays out” in a TRO case, says John Baker, a securities lawyer with Stradley Ronan Stevens and Young in Washington, D.C. The former employer would probably argue “the TRO process is the only means of protecting this customer information.”

Attorneys say a customer cannot bring an action under GLB, but a firm may be able to pursue a complaint through the U.S. Attorney or the SEC, in addition to seeking separate injunction and arbitration claims against a departing rep.

The real question is if any major firm will use GLB against one of its competitors. “Who's going to invoke it when we all [allegedly] violate it?” asks one industry lawyer. The law will likely be cited by “some little oddball firm that doesn't recruit,” he says. “It will happen eventually. I guarantee it.”

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