Morgan Stanley, a prominent financial-services firm, has been granted a temporary restraining order by a federal judge against a former advisor team. The team recently left the wirehouse to establish an independent practice, and Morgan Stanley alleges that they have been soliciting their former clients in violation of their contracts.
Allegations of Improper Solicitations and Confidential Information
According to Morgan Stanley, Trent Leyda and his team have taken highly confidential client information and other proprietary materials from the firm to carry out their improper solicitations. The large financial-services firm is determined to protect its assets and maintain the confidentiality of client records.
Enjoining the Leyda Team and Returning Client Materials
U.S. District Judge K. Michael Moore, presiding over Florida's Southern District, has issued an order enjoining the Leyda team from soliciting any of their former clients. The team has also been directed to return any client records or other materials that rightfully belong to Morgan Stanley.
Making Their Case Against the Restraining Order
The Leyda team has been given until Thursday at 2 p.m. to present their case against the restraining order. They are expected to provide a response to the allegations or seek legal counsel as necessary.
Former Morgan Stanley Team's Background
Until their resignation on October 5th, Leyda and his team were based in Morgan Stanley's Vero Beach, Florida office. As highly successful advisors, they managed over $1 billion in assets and generated nearly $5 billion in annual revenue for the firm.
Lack of Response from Defendants
Following the advisors' resignation, Morgan Stanley claims to have sent a letter to their counsel demanding compliance with nonsolicitation agreements and the return of any client information in their possession. Although the defendants' counsel responded briefly, promising a more formal reply, Morgan Stanley alleges that no further response has been received.
SpirePoint Private Client, Leyda's new registered investment advisory firm, has declined to comment on the ongoing litigation.
Morgan Stanley Accuses Leyda Team of Spreading False Information
Morgan Stanley has filed a complaint against Leyda and his team, alleging that they have been spreading false information to their former clients. The company claims that the advisors gave the impression that Leyda was in charge of Morgan Stanley's Vero Beach office, which is not true. Additionally, they falsely suggested to clients that "no one is left" in the office. However, according to Morgan Stanley, there are still 12 financial advisors operating out of the Vero Beach location, all managed by Vincent Celano for the past decade.
Concerns Raised Over Confidential and Proprietary Information
Morgan Stanley has also expressed concerns about how the defendants handled confidential and proprietary information. In an October 11 letter addressed to the defendants, the company's counsel stated that upon inspecting the departed employees' offices and work areas, they found hardly any client files or documents. Furthermore, Morgan Stanley noted that the departed employees' printing activity in the days leading up to their resignations was highly suspicious.
The company accuses the defendants of printing out confidential client information, including names, account numbers, balances, and estimates of required minimum distribution amounts.
Seeking a Preliminary Injunction
Morgan Stanley argues that obtaining a preliminary injunction against the Leyda team would expedite consideration for their bid to win permanent injunctive relief through an arbitration forum conducted by Finra (the brokerage industry self-regulatory organization).
According to Morgan Stanley, if the court grants a preliminary injunction or temporary restraining order, a Finra arbitration panel would address the matter within 15 days. However, without such relief, a hearing before Finra would not occur for nine to 12 months. This delay would allow the defendants to continue violating their obligations, inflict further irreparable harm on Morgan Stanley, and violate the privacy rights of clients.