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New Schwab solicitation dispute pits firm against current employee

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When leaving Charles Schwab, advisors are not just expected to refrain from soliciting clients — they have to help clients stick with Schwab.

That’s according to a complaint the San-Francisco-based discount brokerage and custodian filed in a federal court in Nebraska at the end of August laying out its expectations for departing advisors.

Specifically, Schwab is seeking a preliminary injunction against David Spiess, a current employee who allegedly had plans to open up his own investment firm. Schwab, which accuses Spiess of breach of contract, said in the filing that a FINRA arbitration hearing will follow.

The complaint states that during the month-long period after Spiess announced his resignation, his “primary duties were to make himself available to assist Schwab with the orderly transition of clients to other Schwab employees.”

Instead, Schwab asserts, Spiess called clients and asked them to join him at the new enterprise. As a result, Schwab is accusing Spiess of breach of contract and misappropriation of trade secrets in addition to breach of duty of loyalty, according to the complaint.

Spiess did not respond to a request for comment lodged at his office.

Schwab “expects that its representatives will comply with their contractual and legal obligations concerning customer information,” said Schwab spokesman Pete Greenley, in an emailed statement. “However, if it becomes necessary, Schwab will not hesitate to enforce those obligations in a court or arbitration proceeding.”

Greenley specifically declined to comment on Schwab’s allegations against Spiess.

Until his last day at Schwab, Spiess will be registered as one of about 1,200 financial consultants. He operates out of the Omaha, Nebraska branch and his phone number and voicemail at the office are still active.

Since giving notice, Spiess allegedly called at least two clients on his personal cell phone, the filing reads, notifying them he was opening up his own investment firm and urging them to come along, according to the complaint. He told one of those clients that he was still getting things together and told her to be patient as he established the new business, Schwab says.

None of the clients were named in the complaint.

Schwab says that clients expressed they knew Spiess was leaving the firm prior to the company notifying them. The filing does not specify the number of those alleged clients.

On the day he gave notice, Spiess allegedly told one Schwab employee he would contact her once his new firm was up and running so that she could work for him, according to the complaint.

Schwab has taken legal action against several other employees this year over client solicitation, including advisor John VanEngelenhoven, who left Schwab this month to open his own firm.

But Brian Neville, an attorney who is not involved in the FINRA arbitration or preliminary injunction, says actions from Schwab against its departing brokers have remained at par.

“They’ve always moved aggressively in this regard,” he says. “Schwab and Fidelity have typically had very strong results doing so.”

Garden leaves are not uncommon on Wall Street, Neville says. It is unusual for a firm to require an advisor to stay on and participate in handing over client accounts, although it does happen at discount brokerages, he adds.

“The idea there is they truly are the firm’s accounts,” he says.

For firms that practice the Broker Protocol, such as Merrill Lynch, clients tend to be more loyal to the advisor than the firm, but Neville says this isn’t usually the case at brokerages like Fidelity, Schwab or E-Trade.

“[This is] their way of making sure that remains the case,” Neville says.

Financial consultants at Schwab service clients that have at least $250,000 in assets, according to company job postings.

Greenley declined to comment on when Spiess’ last day at the brokerage would be.

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