JP Morgan office in Manhattan, New York. Photo: Ryland West/ALM
As two financial giants – JPMorgan Chase and Morgan Stanley – continue their ongoing layoffs this month, JP Morgan is now accusing a former employee – a financial advisor who oversaw $800 million in client assets at the bank – of breach of contract and violating non-solicitation agreements after he departed the company to join competitor Morgan Stanley.
The lawsuit, filed last week in New York state court against advisor Russell Loesh, alleges breach of contract and misappropriation of trade secrets. Loesch, who had managed assets for 459 clients, has denied all allegations.
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On June 11, JPMorgan and Loesch headed off a ruling by a judge on the lawsuit by agreeing to a stipulated preliminary injunction, which bars Loesch from soliciting JPMorgan clients, but doesn’t prohibit him from serving his clients who move accounts of their own accord to Morgan Stanley.
The case will now be addressed in an arbitration forum run by the Financial Industry Regulatory Authority (Finra), the industry’s self-regulatory body. Loesh also accuses JPMorgan of failing to provide clients his new contact information even though he provided it in his resignation letter and the bank is required to provide this information to clients if requested, under Finra rules.
Loesch worked at JPMorgan’s New York office from 2005 until his resignation on May 30, according to the suit. Loesch’s client outreach at Morgan Stanley has been “more than simply announcing his change of employment,” in violation of the one-year non-solicitation agreement he signed, and that he is “actively asking clients to move” to Morgan Stanley by offering lower fees, alleges JPMorgan alleges.
According to court documents, his role heavily relied on internal referrals rather than independent client acquisition, a model that JPMorgan has sought to protect through legal enforcement.
Since Loesch’s resignation, 20 clients, representing $35 million in assets, have transferred or are in the process of transferring their accounts to Morgan Stanley.
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JPMorgan, which has been striving to grow its wealth management business, has filed similar non-solicitation lawsuits against other financial advisors, who departed for competitive firms. As wealth management firms vie for top talent and high-net-worth clients, these non-solicitation legal disputes may become increasingly common.
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Lynn Cavanaugh
Lynn Varacalli Cavanaugh is Senior Editor, Retirement at BenefitsPRO. Prior, she was editor-in-chief of the What's New in Benefits & Compensation newsletter. She has worked for major firms in the employee benefits space, Vanguard and Willis Towers Watson, as well as top media companies, including Condé Nast and American Media.
