JPMorgan files secrets suit over $3.9m client ‘theft’
Bank says former adviser tried to convince clients to join him at Raymond James | Conduct allegedly misused information which was “proprietary and valuable, and would be especially useful to a competitor” | Complaint filed in Michigan alleges breach of contract, tortious interference, and conversion.
JPMorgan Chase has accused a former employee of using confidential information to solicit clients to move their accounts to his new firm, after he left the investment bank in January this year to join competitor Raymond James.
In a complaint filed at the US District Court for the Eastern District of Michigan on Thursday, February 22, the largest bank in the US contends that the private client advisor leveraged confidential information to solicit several clients.
Around six JPMorgan clients, with assets worth around $3.9 million, had already transferred their accounts to the ex-employee at Raymond James as a result of the alleged solicitation efforts, the bank said.
JPMorgan asked the court for a temporary restraining order and preliminary injunction pending the resolution of a concurrent arbitration proceeding being filed with the Financial Industry Regulatory Authority (FINRA).
‘Phone calls’ to clients
The individual worked in JP Morgan’s Chase Wealth Management office in Ann Arbor, Michigan, before he resigned in January. He had been employed by JPMorgan since 2007.
JPMorgan alleges that since leaving the firm, the adviser contacted clients on their personal phones, attempting to induce them to transfer their accounts to him in the Ann Arbor office of Raymond James.
This included telling clients that they could save money on fees, attempting to arrange appointments and “downplaying the experience” of the JPMorgan employee assigned to clients after he had left, according to the lawsuit.
The investment bank said the ex-employee handled the accounts of more than 250 JPMorgan clients with around $132 million in total assets under supervision at the time he departed the firm.
The ‘lifeblood’ of business
Lawyers for JPMorgan cited two agreements between the bank and former employee, entered into in 2010 and 2012, that contained provisions prohibiting him from soliciting JPMorgan clients for one year after his employment with the firm ended, and from using or retaining the bank’s confidential information.
The suit claimed that his conduct constituted misuse of this information which was “proprietary and valuable, and would be especially useful to a competitor”.
JPMorgan’s client list was “the lifeblood of its business”, the firm said, adding that it spent millions of dollars every year on obtaining clients, and that it typically took many years of dealing with clients for JPMorgan to become their primary investing firm.
The bank claimed the defendant’s actions would cause it harm including loss of clients and client confidence, injury to its reputation, the disclosure of confidential information and economic loss.
It asked the court for a temporary and preliminary injunction pending the FINRA arbitration, and for an order that the defendant “and all those acting in concert with him” return any proprietary JPMorgan documents or information.
The complaint was submitted on behalf of JPMorgan by Timothy Kramer and Daniel Kielczewski of Abbott Nicholson, and Leonard Weintraub of Paduano & Weintraub. Counsel for the defendant had not yet appeared.
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