New York-based Morgan Stanley is once again seeking a restraining order to prevent an advisor from soliciting former clients.
The broker-dealer accused advisor Robert Sevcik, who once worked in Morgan Stanley’s Medford, Ore., office, of using confidential information to siphon away clients. The company filed its complaint in U.S. District Court for the District of Oregon, Medford Division on Friday.
The charges come in connection with the 2017 retirement of another Morgan Stanley advisor, James Maddux. On July 12, Morgan Stanley terminated Sevcik for allegedly diverting commission revenue based on a retirement arrangement with Maddux
Sevcik allegedly had access to “hundreds of Morgan Stanley clients with over $160 million in assets” after Maddux’s retirement. Those clients produced more than $1 million in annual revenues for the firm. As part of his retirement, Maddux was to receive declining commission revenue from those former clients over a period of five years.
In its complaint, Morgan Stanley noted that Sevcik signed its "Active Advisor Understanding for Former Advisor Program Arrangement," which imposed non-solicitation and confidentiality agreements upon the advisor. Those agreements were signed when Maddux retired from the practice, and included provisions for injunctive relief from the courts should Sevcik violate them.
Between Maddux’s retirement and his termination, Sevcik also received commissions from those accounts, and when the five years were up would have received 100% of the advisor share for those commissions. However, almost immediately in 2017, Sevcik allegedly diverted client funds away from the retirement arrangement with Maddux, including “improperly executing client trades outside of the arrangement,” according to the complaint, depriving Maddux of “tens of thousands of dollars of retirement income.”
Sevcik subsequently found employment at D.A. Davidson & Co following his termination and allegedly reached out to and spoke with Morgan Stanley clients, according to the complaint, which also said he misled at least one client about the reason for his termination.
Morgan Stanely argues that Sevcik violated a portion of the agreement that prevented him from retaining information or contacting client accounts following any joint producer’s termination of employment.
Also at issue is Finra’s arbitration process, where Morgan Stanley has also filed a claim. With a temporary injunction in place from the courts, Finra will expedite its arbitration process to convene a hearing on permanent injunctive relief within 15 days. Without such an order, the arbitration proceedings might not convene for up to 12 months.
Accusing Sevcik of both breach of contract and breach of his duty of loyalty, Morgan Stanley has sought a temporary restraining order and preliminary injunctive relief, pending the outcome of the Finra arbitration.