Compliance

UBS Challenges Client Recruiting By Former Advisers

A lawsuit filed by UBS against a number of former brokers—accused of too aggressively soliciting old clients immediately after going independent—shows plan participants aren’t the only source of potential litigation.

By John Manganaro editors@strategic-i.com | July 12, 2017
Page 1 of 2

UBS has filed a lawsuit in the U.S. District Court for the District of Connecticut, suggesting four former brokers have breached non-solicitation and non-disclosure provisions contained in multiple agreements signed during their employment.

Coverage of the lawsuit appeared this week in Financial Advisor IQ and other trade media publications. The brokerage and advisory firm alleges the former staffers have breached non-solicitation provisions contained in the UBS Financial Advisor Team Agreement signed by a number of the defendants. Related to these claims, the suit suggests the brokers have “misappropriated UBS's trade secrets in violation of the Connecticut Uniform Trade Secrets Act” and in violation of the Connecticut Unfair Trade Practices Act. Finally, UBS accuses its former staffers of breaching their fiduciary duty to the firm during the close of their employment and of promoting unfair competition.

The brokers named in the suit are Phil G. Fiore Jr., Jeffrey H. Farrar, Louis Gloria and Thomas M. Gahan. According to UBS’s complaint, on June 2, 2017, defendants Farrar, Gloria, and Gahan resigned from UBS without prior notice and immediately joined UBS competitor Procyon Private Wealth Partners, LLC. This was not long after the previous termination of Fiore, who had since formed his own independent advisory company, Procyon.

As the complaint lays out: “Procyon had been recently formed by their former UBS colleague, defendant Fiore, who had been terminated by UBS in November 2016. At UBS, defendants had been part of a team of financial advisers, institutional consultants and support staff known as the FDG Group who managed approximately $8 billion in assets for individual and institutional UBS clients generating approximately $6 million in annual revenue … Almost immediately after defendants Farrar, Gloria and Gahan joined Procyon, defendants began soliciting UBS clients to leave UBS and do business instead with defendants at Procyon.”

Defendants are accused of using “confidential UBS client information to accomplish the solicitation.”

“Defendants' solicitation of UBS clients and misuse of confidential UBS client information, which continues unabated, is in direct breach of non-solicitation and non-disclosure agreements they signed at UBS,” the firm argues. “In addition, defendants have been misleading UBS clients by stating that their former UBS team, the FDG Group, ‘is now’ Procyon or that the entire team had moved to Procyon, when in fact defendants constituted only part of the FDG Group and other members of the FDG Group - including two founding members—remain at UBS. Defendants' misrepresentations have caused substantial client confusion and concern.”

UBS also believes that defendants “began competing against UBS during the six-month period between defendant Fiore's termination in November 2016 and when the other defendants resigned on June 2, 2017. Upon information and belief, Fiore—with the knowledge of the other defendants—for months had had been telling clients about the plan to set-up Procyon and soliciting those clients to move their business to Procyon once the firm was operational.”

NEXT: More detail from the text of the suit