Morgan Stanley sues $660M team for soliciting clients via phone, Facebook

Morgan Stanley is asking a court to block a former $660-million team from taking their clients with them, after they left the firm to join Stifel Financial, a regional BD that has aggressively recruited wirehouse talent.

Morgan Stanley accuses the six advisors of taking confidential company information and violating nonsolicitation agreements by reaching out to clients via phone calls and a Facebook post, according to court documents. Morgan Stanley claims the advisors have been asking clients to move their accounts to Stifel.

The firm’s legal maneuvering mirrors similar court battles it initiated earlier this year against other ex-Morgan Stanley advisors who moved to rival firms. Almost a year has passed since the wirehouse left the Broker Protocol, which permits advisors who switch employers to take basic client contact information with them.

“When departing advisors breach their agreements, remove confidential information or trade secrets including personal client information, or engage in other misconduct, they should expect that Morgan Stanley will take appropriate legal action to protect its rights and to protect the client’s interests in preventing the misuse of their personal information,” a spokeswoman said in response to a request for comment on the firm’s new lawsuit.

Bess Adler/Bloomberg

This latest case comes after the former Morgan Stanley team joined Stifel Financial in Bourbonnais, Illinois on Thursday, Sept. 13.

A spokesman for Stifel, which is not a named party in the case, declined to comment on the matter.

Stifel has recruited a slew of former wirehouse advisors. So far this month, the firm picked up 21 advisors managing nearly $2.1 billion in assets, according to the company. Those new hires included the Bourbonnais group, comprised of Zachary Birkey, Ronald Ouwenga, Jeff Schimmelpfennig, Myron Hendrix, Brian Thomas and Michael Bruner.

Birkey also serves as branch manager at Stifel’s Bourbonnais office, according to a company website. He did not respond to a request for comment.

It is not clear whether the advisors have retained legal counsel.

The team was a high-producing group, generating $4.2 million in annual gross revenue while at Morgan Stanley, according to court documents.

Morgan Stanley claims it learned of the advisors’ alleged solicitation efforts from clients who complained about being called to move their accounts.

One client allegedly received a call from Bruner, and then contacted Morgan Stanley to verify whether it “was actually Bruner or someone posing as Bruner,” according to court documents.

Morgan Stanley also says that the advisors or people associated with them are using social media to get their message out to former clients.

“On a recent Facebook post regarding the group’s change of employment, it appears that Morgan Stanley clients are among those ‘liking’, and ‘commenting’ on, the post,” the firm says in its complaint, which was filed in federal court in Chicago.

Morgan Stanley further claims that the advisors may be making false comments about the firm, saying that “clients have also been asking Morgan Stanley if the Bourbonnais office is closing or if Morgan Stanley is going bankrupt.”

The company does not name any clients in its legal complaint.

The firm also says that “files that were known to exist pertaining to a large institutional client cannot be located at Morgan Stanley’s offices since defendants’ departures. These files took up several file drawers, but now make up approximately only half a drawer.”

The advisors alleged solicitation efforts violate a joint production arrangement policy, which they signed while employed at the firm, and which included a one-year solicitation clause, Morgan Stanley says. Ouwenga and Hendrix had also signed additional nonsolicitation provisions in their employment agreements, according to the wirehouse.

Morgan Stanley is asking for a temporary restraining order while it pursues a separate arbitration case against the team.

Of course, Morgan Stanley isn’t the only firm to have recently sued advisors for allegedly violations of nonsolicitation agreements. JPMorgan Chase has filed several such lawsuits this year, and recently reached a settlement with two former private bankers whom the firm accused of breach of contract.