‘Protocol 2.0’
Steven Kramarsky, who has litigated against JPMorgan, says that as the number of protocol-related disputes has grown, industry insiders have started to grumble about the need for a “Protocol 2.0.”
Until then, there may be little clarity about who falls under the protocol and who doesn’t, giving way to legal action and other maneuvers by banks like JPMorgan to head off departures.
Last year, six advisors left JPMorgan in Morristown, New Jersey, to join Morgan Stanley and invoked protocol protection. JPMorgan went to federal court to request a temporary restraining order. It argued that the advisers weren’t protected by the protocol and claimed breach of contract and misappropriation of trade secrets. The judge rejected its request.
Finra Review
The case was then remanded to Finra arbitration. Last month the parties settled the case for undisclosed terms.
But the matter didn’t end there. Three of the advisers told the arbitrators that JPMorgan had taken measures beyond the protocol to prevent them from taking their skills elsewhere.
The advisers -- Michael Pudlak, Lori Rabinowitz and Michael Reynolds -- demanded that JPMorgan expunge their employment records, known as U5s, which indicated that they were the subjects of an “internal review” and had wrongfully taken proprietary information.
Early this month, the arbitrators ruled that the advisers hadn’t removed proprietary information without authorization. They also said that JPMorgan had falsely amended the brokers’ employment records, and that the timing of the amendments was “suspiciously proximate to the filing of the lawsuit underlying this matter.”
The arbitrators ruled that JPMorgan had defamed the brokers, and they ordered the bank to expunge their records.