A recruiter recently contacted you to transfer brokerage firms with greater payout, compensation and benefits. You want to make the switch but have concerns how to take your clients with you since the deal is contingent on bringing a significant portion of your book of business.
You heard about The Broker Protocol, but do not know exactly what it is and how it works. The Broker Protocol is an agreement signed by the departing firm and the new firm allowing the registered representative to take specific customer information with him or her or to solicit customers from the departing firm. Specifically, the Broker Protocol states, “[i]f departing [brokers] and their new firm follow this protocol, neither the departing [broker] nor the firm that he or she joins would have any monetary or other liability to the firm that the [broker[ left by reason of the [broker] taking the information identified below or the solicitation of the clients serviced by the [broker] at his or her prior firm, provided, however, that this protocol does not bar or otherwise affect the ability of the prior firm to bring an action against the new firm for “raiding.” The signatories to this protocol agree to implement and adhere to it in good faith.” The goal of the Broker Protocol is to further customers’ interests of privacy and freedom of choice in their brokers and brokerage firms.
First thing you need to do is to verify both the departing firm and new firm are signatories to the Broker Protocol. If they are not, the Broker Protocol does not apply.
After you determine both firms are signatories to the Broker Protocol the next step is ascertaining what information you may take. It is important to know that only information may be taken and not documents. The following account information may be taken: client name, address, phone number, email address and account title of clients that they serviced while at the firm (“the Client Information”). This is all the information (not documents) which the Broker Protocol allows. Taking additional information, such as account numbers are prohibited.
According to the Broker Protocol, “[r]esignations will be in writing delivered to local branch management and shall include a copy of the Client Information that the [broker] is taking with him or her. The [broker] list delivered to the branch also shall include the account numbers for the clients serviced by the [broker]. The local branch management will send the information to the firm’s back office. In the event that the firm does not agree with the [broker]’s list of clients, the [broker] will nonetheless be deemed in compliance with this protocol so long as the [broker] exercised good faith in assembling the list and substantially complied with the requirement that only Client Information related to clients he or she serviced while at the firm be taken with him or her”
Brokers who comply with the Broker Protocol may only begin soliciting customers they serviced at their former brokerage firms only AFTER joining their new firms “A firm would continue to be free to enforce whatever contractual, statutory or common law restrictions exist on the solicitation of customers to move their accounts by a departing RR before he or she has left the firm.”
When considering switching between protocol belonging firms: consult with experience counsel; verify both firms are members of the protocol; take only the allowed information and not documents, only solicit after you have left the former firm; do not criticise the former firm; do not change any customer contact information and former firm; and note that the Broker Protocol does immunize one for raiding the former firm of staff and employees.