In 2004, a number of brokerage firms entered into an agreement that set standards for how they would treat brokers and financial advisers who left their old firms for competing firms.  The purpose of this agreement, known as the “protocol” or “broker protocol” was, in part, to provide departing brokers and their new employers with clear guidelines they could follow to avoid legal retaliation from the broker’s former employer upon the broker’s moving firms.  Recently, a number of firms—including large players such as Morgan Stanley, UBS and Citigroup—have left the protocol, resulting in increased litigation between brokerage firms when a departing broker leaves their old firm for a competitor.

Departing brokers who leave their former firms are subject to detailed noncompete and nonsolicitation agreements which often prohibit brokers from contacting former clients whom they serviced while at their former firm. The scope, enforceability, and applicability of these noncompete and nonsolicitation agreements can be confusing. The extent to which departing brokers can contact or communicate with former clients after departing their former firm is highly dependent on the wording of these agreements and a broker’s breach of these agreements can subject their new employer to legal liability.