Wednesday, April 9, 2014
Can your employing broker-dealer prevent you from bringing your customers with you to your new employing member firm when you leave for a better opportunity? Yes. Can your employing broker-dealer stop your customers from transferring their account to your your new employing member firm? Absolutely not. See the difference? As FINRA explains perfectly in a Notice to Members, "As a condition of employment, certain members require their registered representatives to sign employment contracts in which each registered representative agrees that when he or she leaves the firm, he or she will not take, copy, or share with others any firm records. In addition, the registered representative may agree that, for a certain period of time following his or her departure from the firm, he or she will not solicit the firm's customers for business. Nonetheless, when a registered representative leaves his or her firm for a position at a different firm, clients serviced by the registered representative may decide to continue their relationship with the registered representative by transferring their accounts to the registered representative's new firm." The specific rule that prohibits interference with a customer's decision to transfer the account in such cases is FINRA 2140. Since you wouldn't otherwise be able to sleep tonight, I'll go ahead and reproduce that rule for you here: 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." So, if you leave your firm for greener pastures, please do not violate your employment contract by poaching customers or--probably worse--walking out with their account information on a little thumb drive. But, if your customers decide to move their account when you make your move, your firm cannot play hardball with them and try to interfere with an ACAT transfer.