J.P. Morgan Securities is suing a former advisor they argue is lulling clients to follow him to his new role at Commonwealth and violating non-solicitation agreements.
In a complaint filed in Florida federal court, J.P. Morgan called for a temporary restraining order against Daniel Sutton while FINRA arbitration proceedings progressed. But in a responding volley, Sutton’s attorneys argued J.P. Morgan had not “provided any evidence” to support the accusation that Sutton solicited clients using privileged information. In a court hearing on Friday, the judge agreed to extend the TRO for 14 days.
Sutton joined the industry in 2010 with stints at AXA Advisors and Merrill Lynch before joining J.P. Morgan in 2013, according to his BrokerCheck profile. J.P. Morgan’s complaint alleges that before Sutton resigned on Oct. 5 to join Commonwealth, he took a vacation. In the evening of Oct. 2, he accessed 49 client profiles, “much more than he viewed on a typical workday,” according to the complaint.
Client profiles include information on “names, addresses, customers’ net worth, investment objectives, and similar information that is confidential and not readily known by competitors and that must be safeguarded,'' according to J.P. Morgan. When he began working for J.P. Morgan, Sutton allegedly signed a non-solicitation agreement prohibiting him from soliciting his J.P. Morgan clients for one year after leaving.
At the time he resigned from J.P. Morgan, Sutton was working as a Private Client Advisor at a bank branch office in Tampa, Fla., and was not expected to cold call or “build a client base independent of referrals” from the bank, according to the complaint. Instead, the “vast majority” of Sutton’s clients were assigned or referred to him by the bank.
But J.P. Morgan believed Sutton had succeeded in attracting some bank clients over to Commonwealth (where he’s been FINRA-registered since Oct. 5).
At least 10 J.P. Morgan clients informed the bank that they’d received calls from Sutton “informing them that he was leaving or had left J.P. Morgan to join Commonwealth.” According to the complaint, on Oct. 6 Sutton made one of these calls to a former client while she was at a J.P. Morgan office speaking with two bank employees.
In all, the bank believed nine of Sutton’s J.P. Morgan client households (with about $26 million in assets) had transferred accounts to Commonwealth. Sutton had allegedly viewed seven of nine of these households’ client profiles during the evening of Oct. 2, in what the bank alleged “cannot be a mere coincidence.”
“(Sutton’s) solicitation of JPMorgan clients is ongoing, and without immediate intervention by the Court, (Sutton) will continue to breach his contractual obligations to JPMorgan causing significant harm that cannot be undone,” the complaint read.
But in a court-ordered response, Sutton argued that J.P. Morgan’s only evidence that he violated prior agreements was that he’d looked at client profiles before his departure, and that he’d contacted clients after he left. But Sutton stressed the firm hadn’t shown any evidence he copied information from those profiles or solicited clients when calling them.
“To be sure, no such evidence exists because (J.P. Morgan), a highly sophisticated firm, would have readily uncovered it given the alleged ‘significant measures’ it takes to protect its confidential information, and during the weeks-long investigation it would have conducted to develop actual evidence to support its claims,” Sutton’s memorandum read.
Sutton also claimed that all the customers who’d transferred to Commonwealth would attest that Sutton had not asked them to follow him to Commonwealth, but that they chose to open Commonwealth accounts with him.
Additionally, Sutton cited a previous case in which J.P. Morgan counsel said that a departing advisor wouldn’t be improperly soliciting clients provided they didn’t use J.P. Morgan information to make the contacts.
Representatives for J.P. Morgan and Sutton did not respond to requests for comment prior to publication.
J.P. Morgan previously stated that its bank branch advisors such as Sutton do not fall under the protections of the Protocol for Broker Recruiting, established in 2004 to offer advisors greater flexibility (and less legal jeopardy) when soliciting clients after moving between wealth management firms.