Edward Jones sues LPL advisor after clients transfer $7M to his new firm

Trader Talk

Edward Jones is suing an advisor who left to join rival LPL Financial, accusing him of breaching non-solicitation agreements by enticing the “majority” of his clients to move to his new employer.

The lawsuit, filed in federal court in Missouri May 1, marks the latest effort of a big brokerage firm to enforce former employees’ client contacts.

When Andrew Stotler quit April 20 amid a spreading coronavirus pandemic, advisor Andrew Stotler allegedly took client contact information with him in violation of his employment agreements, Edward Jones claims.

As of May 1, Stotler’s clients have transferred $7 million of the $44 million he managed at Edward Jones to his new employer, according to Edward Jones’ lawsuit.

The firm claims the sum represents a big hit to its operations in Pacific, Missouri, the small town of 7,000 where Stotler was based, damaging “the financial viability of the Edward Jones’ Pacific, Missouri branch office because he has solicited Edward Jones clients representing a significant amount of assets, as well as caused noncompensable damages to Edward Jones’ business reputation and the goodwill it has developed at great effort and expense over the years.”

Edward Jones, which is based in St. Louis, typically operates single-advisor offices. It has five other FAs in the same zip code as Stotler, according to its website. The firm fields approximately 18,000 advisors serving 7 million clients. In March, Edward Jones suspended face-to-face meetings with clients, citing the health risks posed by the coronavirus outbreak.

Stotler improperly took customer information with him when he quit to join LPL in violation of his employment agreements, the firm alleges in its suit. “Edward Jones takes substantial precautions to protect client information,” the company said in a statement. “By targeting current Edward Jones clients through unsolicited telephone calls, social media messages and personal visits, Stotler breached his employment agreement by using client information against firm policy,” a company spokesman said in an email.

Neither Stotler nor LPL Financial could be reached for immediate comment.

LPL Financial, an active recruiter of advisor talent, is a member of the Broker Protocol, an industry agreement that facilitates advisor moves by permitting them to take basic client contact information with them. Edward Jones, however, is not a member and like other non-protocol firms has gone to court to prevent former employees from soliciting clients.

Edward Jones has asked a federal judge to impose a temporary restraining order on Stotler to prevent him from speaking with clients.

To underline the importance it places on client information, the firm requires its advisors to acknowledge its trade secret status every six months “or be denied access to said information on the office computer,” its lawsuit says.

“Such information is valuable to competitors because it can be used to target solicitations of an otherwise unknown group of investors,” the firm adds.

In addition to the lawsuit, Edward Jones is pursuing a FINRA arbitration case against Stotler for unspecified damages.

Leave a Reply

Your email address will not be published. Required fields are marked *