Broker Dealers are Prohibited from Preventing Customers from Following a Financial Advisor after his/her Departure for Greener Pastures

I’ve counseled hundreds of registered reps who, for one reason or another, have decided to leave their current broker dealer and move to a new platform.  Of course, they want “their” clients to move with them.  And usually, the firms want “their” clients to stay.  Some firms will even do whatever it takes to keep customers — and the revenue they generate — from switching.  They will even do this when the customer has had a lengthy and positive relationship with the departing representative, thus attempting to prevent the natural continuation of an extremely positive relationship.

In reality, the clients do not “belong” to anyone — they have the control to move wherever they choose — or to stay.  FINRA Rule 2140 makes this absolutely clear:

“No member or person associated with a member shall interfere with a customer’s request to transfer his or her account in connection with the change in employment of the customer’s registered representative where the account is not subject to any lien for monies owed by the customer or other bona fide claim. Prohibited interference includes, but is not limited to, seeking a judicial order or decree that would bar or restrict the submission, delivery or acceptance of a written request from a customer to transfer his or her account.”

 

Although this regulation could not be more explicit, some firms persist in flouting it not only in spirit, but in practice.  So, if you’re a registered representative and your firm asks you to call clients previously assigned to a representative who just departed, and to tell those clients that they are not allowed to switch — do the right thing and tell your manager that you can’t do that given the rules and report the matter to compliance.  Or, if you’re a departing broker and you learn that such wrongful communications are made about you, it would be wise to retain an experienced financial services attorney to take immediate action to protect you.

Rely on an Experienced Baltimore Business Attorney

Finally, if you’re a customer who wants to ensure that your choices with how you want to invest your hard-earned dollars are respected, and anyone tells you that you can’t move your account to a new firm, don’t listen and transfer your assets to the new firm if that is what you choose to do.  And let your long-time broker who just switched firms know what his former firm is doing so that s/he can take steps to protect his/her livelihood and handle the matter appropriately..