Non Compete

Standard Jones contract has a one year non-solicitation provision, meaning you're prohibited from soliciting clients, either directly or indirectly, during that period.  However, from what I've heard from others, Jones for the most part has been fairly good about not routinely going after their IRs so long as you're not blatantly soliciting clients, and you use a more indirect approach.  So, the last thing you want to do is send out letters w/ new account forms, etc..  You can almost be guaranteed they'll hit you. 

The trick is to make it known to your clients that you've left and where you are now.  It is the client's money & there's nothing to stop them from then contacting you and initiating the steps to get the accounts transferred.  In smaller towns do things like place announcement ads in the local paper and maybe get the business editor to write up something about you and your move.  You can also send out a general mailing (to your town, a zip code, club rosters, etc.), that would obviously also include your clients.  Again, all you're trying to do is make sure your clients know where to find you.  Your good clients will contact you.

Of course, like almost all brokers who leave a firm, you might also choose to carefully and confidentially talk with your select "A" list clients to advise them of your pending move.  There's an obvious risk in doing this, of course.

A more agressive strategy is to write your clients simply informing them that you've left Jones & where you are now.  Don't include any solicitation language.  In a sense, such a letter can be viewed as just you being a responsible and diligent broker by appropriately notifying clients of the change so they're not unduly concerned about their money & securities should they call or try to contact you about their account at your old Jones office.  You were just carrying our your "fiduciary duty", in a sense.  It's not to say there's not at risk in this strategy, but it may be a very defendable action should Jones come after you.

After having said all this, just take it with a grain of salt (or ignore it completely).  I'm only sharing some limited practical advice that others in your situation have utilized, and you shouldn't rely on it. The best thing you need to do if you plan to leave Jones or any firm where you're under contract is to go to a good SECURITIES attorney (not even an attorney that's a specialist in employment law or contracts).  You need the unique expertise of a lawyer that deals with these particular issues.  They can appropriately counsel you on the good, bad, & ugly of your contract, counsel you on how best to handle your move, and will be prepared to aggressively act should Jones come after you.  The few hundred dollars you spend on this initial counsel will be invaluable, and may help to avoid you paying many thousands of dollars in settlements and legal fees after you leave Jones.  Bill Singer who posts on this forum is one possibility, but there are a number throughout the country. 

That sounds like a pretty strict non-compete.



What are other firms like? 

Virtually all wirehouses & bank b/ds have similar non-solicitation provisions.  Unless they’ve changed recently, AG Edwards does not.  Also, Raymond James & Associates does not.  All independent contractor firms should not, but I guess there might be some isolated exceptions.

[quote=Duke#1]Virtually all wirehouses & bank b/ds have similar
non-solicitation provisions.  Unless they’ve changed recently, AG
Edwards does not.  Also, Raymond James & Associates does
not.  All independent contractor firms should not, but I guess
there might be some isolated exceptions.[/quote]



Must not be too much of a barrier then, because a lot of reps are moving!

[quote=inquisitive][quote=Duke#1]Virtually all wirehouses & bank b/ds have similar non-solicitation provisions.  Unless they've changed recently, AG Edwards does not.  Also, Raymond James & Associates does not.  All independent contractor firms should not, but I guess there might be some isolated exceptions.[/quote]

Must not be too much of a barrier then, because a lot of reps are moving!


[/quote]

And a lot of reps are getting sued!

A new tactic by at least one firm is NOT to bring an injunction, but to wait the year of the non-compete, and then sue the broker and his new firm for the commissions earned from the "firm's" customers for that year.

Mark

www.seclaw.com

As someone else (an attorney) mentioned, employment contracts can be
customized.  Has anyone had any success at getting any
non-compete/non-solicitation language removed from contracts?



Every firm out there is actively recruiting.  Wachovia isn’t going
to recruit unless it is worthwhile to them.  Neither are the other
firms.  If everybody is getting sued, then nobody would be
recruiting anyone.  Right? 

[quote=inquisitive]As someone else (an attorney) mentioned, employment contracts can be customized.  Has anyone had any success at getting any non-compete/non-solicitation language removed from contracts?
[/quote]

Every contract is negotiable, even RR employment contracts. The answer, and result, depends on how much leverage you have.

[quote=rrbdlawyer]Guys, let me give you all a newsflash — employment
contracts really aren’t negotiable at most major firms and they are
rarely customized.  [/quote]



Interesting.  In the following thread, you said:



http://forums.registeredrep.com/forum_posts.asp?TID=590&am p;PN=1



"Frankly, as a securities-industry lawyer and former Series 7/63 I don’t
understand the practice of amateur-hour when it comes to acting as
one’s own non-legal counsel, but it is what it is.  Most FAs seem to
accept the following industry wisdom:  1.  You’re essentially being
offered a form contract that largely non-negotiable; 2. The firm won’t
likely alter anything substantial; 3. Why waste your time having a
lawyer review it when there’s probably nothing he/she can do to improve
your offer;"



First, you give the impression that things are negotiable, hence a
reason to consult an attorney such as yourself.  Then you say that
nothing is negotiable.



If a contract for an experienced broker isn’t negotiable, then a contract for a new one isn’t going to be, either.



Which is it?

No, new account forms aren’t negotiable.



I haven’t seen every rep employment contract out there.  I’m going
to assume that most firms are pretty similar to what I’ve seen.  I
do know that overly-restrictive non-compete provisions are going to
severely limit a person’s ability to jump ship if things turn bad
(Jones discussion in this thread).  This, of course, is what the
firms want.

<span =“bold”>

Regarding the protocol for contacting clients and notifying them that
you’ve moved to a new firm, I’m sure some of us are wondering what is
and what is not allowed. 



Is a general announcement letter allowed?  Can you send your clients account transfer forms?



The last thing anyone wants to do is violate terms of their contract
that get them in legal hotwater.   Granted, some firms are
going to have different contractual language, but there has to be some
general guidelines reps can follow when they join a new firm and try to
bring over their clients.



Are there any general guidelines for soliciting/notifying clients that
you’ve moved to a new firm?  Does anyone have any knowledge if
there are different restrictions between big wirehouses and other firms?



Reps are switching firms.  They aren’t all starting over from
scratch.  So the clients are following them.  The stuff in
this thread is the most restrictive I’ve heard of.  The big
wirehouses typically aren’t like this, are they?  Maybe Jones is
different because of all they do in training and getting an office just
for one rep.

Sure, notifications aren’t solicitations (wink).  I wonder if any
brokerage firms will ever prohibit those in their contracts.



Frankly, I don’t like non-competes because I think the ultimate choice
lies with the client where he or she goes.  Joe Blow broker can
buy a lead list and solicit the client, but someone who has an
established relationship can’t.   Besides, the only power a
rep has is the power to take his clients out of wherever he is. 
It’s his bargaining chip.  I think of the phrase “restraint of
trade”.



Don’t get me started on raiding, either.  Those raiding
arbitrations are absurd.  It’s their choice if they want to leave
for someplace better.  If a firm comes along and recruits an
entire office, if it’s the best for the reps and clients, I don’t see a
problem.  Raiding regulations stifle competition.



If a guy leaves Merrill Lynch for Smith Barney, he can’t solicit his
clients–only inform them of his move.   Since he isn’t
allowed to solicit his former client, can another rep from his branch
solicit the client?  I can’t imagine that would stand a chance,
but it doesn’t hurt to ask.



I found this story:



http://registeredrep.com/career/finance_noncompete_trap_no /

--------------------------------------------------
Beyond the legal rulings and regulations, brokers are also benefiting from a softer stance on non-competes than in the days when Gerald Randisi first entered the business. “You can easily go to many firms without a non-compete,” says John O'Neill, a partner with Houston-based Clements O'Neill. “If you refuse to sign, many brokerages will negotiate this with you on the front end.”

Of course firms are not likely to advertise this fact. Non-competes and non-solicitation agreements are usually hidden in documents outlining policies and procedures an incoming broker must follow. “The broker needs to be cautious,” O'Neill warns. “An attorney should review all of the employment documents before he signs them.”

Pescosolido, the Baltimore attorney, says he has seen wirehouses that recruit experienced brokers and tell them that they won't have to sign non-competes. Then, they hit them with a non-solicitation agreement, after they've started working, and threaten to fire them if it's not signed. “I tell people to stand their ground and don't sign it,” Pescosolido says. “Some states invalidate laws concerning ‘afterthought’ convenants. Many times firms back down when brokers refuse to sign on the basis they were told there were no non-competes.”

I know that much of this post is a re-hash of information that has been posted on these forums in the past, but it is a summary of what I have found during my due diligence, along with some of my questions that I would appreciate some feedback on.

I started in the bank channel a bit over five years ago, and on the third day of my employment, I basically had a non-compete thrust in front of me that I was asked to sign.  While I had slight misgivings about the general nature of the document, I was grateful for the job opportunity, never dreamed of the day when I would be dissatisfied, and was fearful of the possible consequences if I refused to sign the document.  Of course, like almost all naive rookies, I signed the non-compete.  Where I retained the intelligence to keep a copy, I have no clue.

Now that I am very unhappy due to several adverse changes in the compensation schedule, and a bunch of mandatory UNPAID training days, I am looking at this stupid document and cursing myself for ever signing it.  Not only is there a one-year nonsolicitation clause, the firm went one step further and put a non-compete clause in that essentially completely bars me from being in the business in my current geographical area.  So unless I want to either move away or completely change careers, I feel helplessly locked in with my current employer.  I can understand the non-solicitation clause to a degree and I have no intention of sending out a form letter to all my clients saying dear clients, I have moved out.  Please come in and see me if you want to move your accounts to my new firm.  On the other hand, I am struggling with the fairness of a company telling me that I cannot make a living unless I move away or change careers.

After spending some time doing due diligence, I have reached several conclusions based on feedback from the firms I am looking at.  First of all, most everybody is in agreement that the clause barring me from being in the business in the same town is pretty much non-enforceable.  The comment I keep getting is that the firm cannot tell me that I cannot earn a living.  Apparently, the courts in the past have taken a pretty dim view of these clauses and elected to bar enforcement.

The second opinion that I keep hearing is that while I cannot solicit former clients for one year, my current (soon to be former) firm cannot prevent clients from coming to me and requesting the move.  Neither can my current firm prevent me from advertising in the local newspaper, or having an open house, either of which can certainly generate requests from former clients to move to my new firm.

Finally, and probably most obviously, my current firm cannot prevent me from chasing after new prospects that were not customers when I leave. So, if nothing else, it appears that these folks are fair game from day one.

Some questions I still have that I'd like for posters to address are 1.  What are my actions limited to if my previous firm files a TRO?  Does that completely stop me from all business or just transferring clients over from the old firm?  2.  Given my overall situation, if I follow the advice I've received thus far, what is the probable outcome of any action brought by my old employer?

Naturally, I am concerned about being able to make a living during the first year and yes, before you even ask, I will be consulting a securities attorney before I effect this change.  I am intersted in your opinions and if I am mistaken, your corrections, and of course, all constructive advice is appreciated.

“the broker always pays”

 hello mr rrbdlawyer you havent responded to indyone's post.  lots of us little guys would like to know your thoughts on that

thanks

 Bill

Thanks for the information. 

Bill, thanks for the information.  FYI, I can tell you that this non-compete was my first exposure to such things as my former firm did not have any such animal.  While ignorance may not be bliss, I hope that explains why I feel I was ambushed...thanks again...

oh...and send me your bill...

I left Jones just a week or so back, I have not moved a single client from my old office (approx 16 Million total assets). Today, I received a cease and desist letter from Edward Jones. Anyone ever heard of receiving this letter without sending any ACAT’s in? I am beyond my 3 year window with the firm.

Bill- I want to start a Boy Band and tour the West Coast on my weekends, going on benders and meeting groupies. Can you put me in touch with a guy? Maybe the guy behind the guy?

My experience with breaking Dean Witter's employment contract was favorable and free. Long story short:

I quit my bank job, sold my house, moved across state, and took a job with Dean Witter. During my 3 interviews, prior to being offered a job, no mention was made of an employment contract. My first day at DW, an employment contract is shoved in front of me, so I signed it. (Since I burned all the bridges behind me, what else was I supposed to do?)

I broke the contract 1.5 years later. Two weeks after that, a call came from DW's NY Headquarters - Legal Department. They claimed I owed for training fees. I told the lawyer what occurred, that it was fraudulent for DW not to tell me about the contract prior to employment, and that if they pushed the issue, I would sue DW for fraud. DW backed off.

You might be able get out of the contract, given your circumstances, and the fact that there are 3 days difference between your first day of employment and the date on your signed contract. The 3-day difference could help support your contention that no mention was ever made of an employment contract, during your interviews; almost representing an afterthought.

A common strategy is for a broker-dealer to require its registered representative to reaffirm the restrictive non-solicit covenants upon certain events such as participation in a profit sharing or stock option plan well after the registered rep's initial affiliation.  You will need to look at the law of the applicable state to determine whether there's been sufficient "consideration" for the new contract and restrictive covenants.  Consequently, you should avoid getting so focused upon the offer that you miss any subsequent restrictive covenants that were agreed to a later date.  

Often times, those broker-dealers that do business throughout the country utilize an overly broad and burdensome non-solicit covenant.  Since certain states will not sever the offending provision and instead throw out the entire agreement, it's important to have an attorney carefully analyze the registered representative's non-solicit restrictions in relation to what's permitted by the state.

Overall, the legal analysis that needs to happen in these situations is very fact specific and the state laws vary significantly on what is and isn't permissible with respect to non-solicit provisions.  When giving advice to my clients that are departing registered reps subject to a non-solicit covenant, I generally review hundreds of pages of key document and prepare a memorandum of three to five pages, which includes my analysis and recommendations.  In other words, I would recommend that an individual in such a situation engage an attorney since this blog isn't well suited for the necessary analysis. 

 I dug up this old thread to see what others my situation.  I resigned about 7 months ago from Edward Jones–their legal firm Goldberg Wehrle LLC sent me a letter in May along with a copy of my employment agreement at Jones.

You were with Jones for almost 14 years?

Yes I was!

It is an incomplete,  invalid contract.

[quote=Broker7]It is an incomplete,  invalid contract.[/quote]

Are you a lawyer?

Thanks for the comments, is there a lawyer in the blog?

no…but missing information, such as dates, invalidates contracts

I agree with you too.  My only question is since I went ahead and took the job and signed the paperwork and they signed the paperwork (even though the signature and date were just stamps) is the contract in effect a legal contract based on intent?  My gut feeling is since they failed to place a date start date on the contact and was left blank–the contact was invalid!

The date is the most important component of a “timeframe” contract.

Thanks for the comments, is there a lawyer in the blog?

Bill if you are out there–I would appreciate your comments.

This is a great example of us trying to help each other and probably causing more harm than good, at least if someone takes this advice.  Just because we want something to be true, and would personally like to pull one over on the big firms, doesn’t make it true.

Thanks!  I agree with you–and you are right, I would love to stick it to em!  Maybe it’s because their lawyers sent me three letters accusing me of contacting clients after I left when I know that I followed the rules to the letter of the non-compete…It made me very very angry.  There is noting worst than being accused of doing something and being innocent.  That’s all I received was letters–no followup no other action!

Thanks!  I agree with you–and you are right, I would love to stick it to em!  Maybe it’s because their lawyers sent me three letters accusing me of contacting clients after I left when I know that I followed the rules to the letter of the non-compete…It made me very very angry.  There is noting worst than being accused of doing something and being innocent.  That’s all I received was letters–no followup no other action!

[quote=Broker7] 

Do any problems around here not involve Edward Jones? lol

Like many issues, it originated with EDJ.  However, it does have broader implications for the rest of us.  Someday I’ll share a story about the current noncompete I have, but I’m holding that story under my hat for the time being in case I somehow get outed.