Reuters: Regulatory News: Ex-Merrill brokers return client docs in lawsuit

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Ex-Merrill brokers return client docs in lawsuit Apr 26th 2012, 20:50 By Ashley Lau April 26 | Thu Apr 26, 2012 4:50pm EDT April 26 (Reuters) - A team of former Merrill Lynch brokers who left to join rival Morgan Stanley Smith Barney had to return boxes of documents containing client information early Thursday morning after Merrill filed a lawsuit against the brokers for taking confidential data. An Alabama federal court late on Wednesday filed a temporary restraining order to former Merrill advisers Stephen Vise, Henry Hagood and Christopher Baker after the brokerage alleged that the team stole trade secrets by accessing data on clients with more than $216 million in assets. Merrill, a unit of Bank of America, also claimed that the advisers took more information than what's allowed under the industry's Protocol for Broker Recruiting, an agreement intended to minimize legal disputes when advisers switch firms. Under the protocol, brokers are limited in the information they can bring over, typically client names, addresses, telephone numbers and e-mail addresses. In a court case involving still shots of surveillance footage as evidence, Merrill claimed that the advisers spent the Saturday prior to their resignation copying and printing out client statements and making "multiple trips out of the office carrying binders, brief cases and a banker's box." The advisers later resigned at 9:33 a.m. on the following Monday, April 16, to join Morgan Stanley Smith Barney. Morgan Stanley Smith Barney, the largest U.S. brokerage, was formed after the merger of Morgan Stanley's wealth unit and Citigroup's Smith Barney in 2009. Among the information included in those client statements were account numbers, specific monetary balances for each account, the cost basis of what was purchased and the profits and losses in each position. A forensic review also showed that Hagood used a removable storage device to access computer files with client information for another financial adviser team in the office. "The dissemination of such information could jeopardize client privacy and damage the good will of a business such as Merrill Lynch," the court said in its opinion filed on Wednesday. "We're pleased with the judge's order, and we did receive information today consistent with the order," said Bill Halldin, a spokesman for Bank of America. Halldin said the company received two boxes of the requested documents back and is now going through the material. The advisers had initially requested that the court deny Merrill's motion for a temporary restraining order, stating that "Merrill has taken facts, which are entirely consistent with a Protocol transition and wrapped them in speculation in order to obtain an injunction," in a brief filed on Tuesday. A spokeswoman for Morgan Stanley Smith Barney said it was unfortunate that Merrill Lynch felt compelled to commence the lawsuit. "These matters are typically resolved between Protocol-member firms without the need for litigation." She said the firm is "optimistic that the pending matter will be resolved satisfactorily" and is "pleased that the court's order found in favor of two of the advisers." While Merrill had gone after all five members of Vise's team, the court said that it is unlikely Merrill will succeed on the merits of its claims against advisers Richard Vise and Tina Littlepage. A lawyer for the brokers was not immediately available for comment. Link this Share this Digg this Email Reprints

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