Texas showdown between UBS and top-ranked advisor over $180M book
A Texas judge will hear arguments later this month in a dispute between UBS and a former broker who jumped ship to Morgan Stanley, allegedly improperly bringing more than $97 million in client assets with her.
UBS is suing to block Alexandra Van Meurs, a top-ranked advisor on Forbes' list, from soliciting her former clients after she made the leap to a Houston office of Morgan Stanley in May, bringing four members of her practice with her.
In its lawsuit, UBS acknowledges that the matter will ultimately be adjudicated through FINRA arbitration, but is asking a Texas state judge to intervene with a preliminary injunction to prevent Van Meurs from soliciting her UBS clients.
In a pair of filings with the court, Van Meurs' attorneys flatly reject the substance of the allegations and UBS' request that the court grant its motion for expedited discovery in the matter.
"Van Meurs is not bound by any enforceable contract, nor is there any basis for preventing her from both notifying her clients of her new contact information and receiving and processing requests from those clients to transfer their accounts if they decide to do so," her attorneys write in their response to UBS' complaint. "To the contrary, Van Meurs' legal and ethical obligations under the ethical and regulatory rules of the securities industry not only allow her to do so — they require her to do so."
Van Meurs is dually registered as a broker and investment advisor, so she is held to a fiduciary standard that permitted her to notify her clients of her new contact information, her attorneys argue.
Judge Marilyn Burgess of the district court of Harris County, Texas, has scheduled a hearing for July 27 to consider UBS' discovery request and Van Meurs' request for the court to compel the parties to begin FINRA arbitration proceedings.
Van Meurs noted in her request for arbitration that in FINRA proceedings "depositions are specifically disfavored and written discovery is limited — and, thus, UBS' request is an improper attempt to secure testimonial and written discovery from this court that would be disallowed by a FINRA arbitration panel."
In the absence of any provision for expedited discovery in FINRA proceedings, Van Meurs called UBS' request "nothing more than an 'end run' around FINRA discovery rules" that would amount to "an improper fishing expedition in direct contravention of FINRA rules."
Attorneys for Van Meurs did not immediately respond to requests for comment. A receptionist at Van Meurs' Morgan Stanley branch office declined comment on her behalf. UBS declined to comment on the case as well.
In its complaint, UBS alleges that Van Meurs, who joined the firm in 2007 as a client service associate, eventually entered into its New Financial Advisor Development Program. All participants in that training program sign an agreement pledging not to solicit any of their UBS clients for six months following their departure from the firm.
In Van Meurs' case, UBS contends that she was the recipient of a $180 million book of business that she inherited in 2014 upon the retirement of another advisor, Karen Hughes, "instantly giving her a steady income stream from current clients," the firm writes in its complaint.
"This was a substantial windfall to Van Meurs," UBS says. "This arrangement vastly increased Van Meurs' compensation and instantly gave her a considerable client following."
That transition complicates the case, says Bill Singer, a veteran securities attorney who runs the Broke and Broker blog.
"In the dispute between UBS and Van Meurs, the issue is thorny because of the substantial book of 'inherited' business that Van Meurs obtained while at UBS," Singer says.
UBS contends that an agreement that Van Meurs signed providing for the transition of those accounts carried a one-year ban on soliciting those clients should she leave UBS for any reason.
In spite of those agreements and UBS' confidentiality policies, "Van Meurs immediately began reaching out to her UBS customers ... to solicit them to move their accounts to Morgan Stanley."
Van Meurs counters that at the time most of the agreements were signed, UBS was still a member of the Broker Protocol recruiting framework, rendering them unenforceable. (UBS and Morgan Stanley both withdrew from the Protocol in 2017.)
"Simply going by the numbers and jurisprudence," Singer says, "Van Meurs has raised the better arguments, but whether she will win or lose will depend upon how the court views her conduct in terms of complying with any executed agreements with UBS."