If Bank of America Signs Protocol, It’s Business As Usual. If Not, Maybe Not

If Bank of America signs the broker protocol, it will be pretty much business as usual for Merrill advisors, say securities lawyers. But advisors may not know whether BofA will sign it before they have to sign their own retention agreements—by November 14. If the bank is going to sign, some wonder, what is it waiting for?

If Bank of America signs the broker protocol, it will be pretty much business as usual for Merrill advisors, say securities lawyers. But advisors may not know whether BofA will sign it before they have to sign their own retention agreements—by November 14. If the bank is going to sign, some wonder, what is it waiting for?

“If Bank of America signs the agreement in the future, advisors will be protected under that agreement—regardless of whether the FA has signed a retention contract that says the firm may sue them if they leave and take client data,” says Stuart Meissner, an securities arbitration attorney at Stuard D. Meissner LLC, citing prior cases where the protocol was successfully used in defense. That said, even if Bank of America signs the protocol, there is always the risk that it or another firm will drop out. If that is the case, a court of law would fall back on a signed retention or employment contract.

Brent Burns, an attorney and partner with Lax Neville, LLP, says he thinks that Bank of America will, in fact, sign, but he’s telling his Merrill advisor clients that there are risks. “It’s an incomplete picture” he says. “It’s not an easy one or the other thing. The brokers didn’t sign the protocol, the firms did, so the firms can drop out. There is no broker who is a signatory. If you join a firm you think is part of the protocol, but they drop out, you could be in trouble. You fall back on whatever contract you have signed.”

Why would it matter if Bank of America signs the protocol? “If BofA signs the protocol, it suggests they are not going to enforce this agreement,” says Burns, referring to the language in the retention contract that addresses whether advisors can take basic client information with them. “And if they go back on the protocol once they have signed it, then their word is no good. This is not good business. It could generate a lot of lawsuits.”

For a previous story on Merrill’s plans to issue a clarification about this part of the contract, go here, and for a story about advisor frustration with the TRO language, go here.

Currently, the retention contract states that the signing FA—should he decide to leave during the seven-year term of the contract—“agrees to not recruit any Bank of America employee, either directly or indirectly,” and also to “return to Bank of America all customer info and records in any shape or form and to be enjoined from using or disclosing all such records.” An FA who doesn’t abide by these rules could face a temporary restraining order, according to the contract.

The contract also states in paragraph 11 that, “this agreement constitutes the sole agreement between the parties as to the subject matter hereof, and (insert name) represents that in executing this agreement, (insert name) has not relied on any statement, promise or representation not set forth herein.”

While the contract does not include specific non-compete language, it does contradict the terms of the protocol, which allows advisors take basic client information—like names, phone numbers and addresses—with them when switching firms, without fear of legal reprisal.

Still, Burns says that the fact that there isn’t specific non-compete language suggests that advisors will protected if they try to work with former clients at new firms. “For most advisors, 20 percent of their clients represent 80 percent of their business. They know their names, where they work, their addresses and phone numbers,” he says.

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