Morgan Stanley Smith Barney is seeking a restraining order in federal court against a former financial advisor working in both New Jersey and Colorado who the company said tried to get clients to follow him to his new employer, UBS, and in doing so violated the non-solicitation and confidentiality provisions of his contract.
The complaint said the advisor, Michael Crotty, served hundreds of clients with $540 million in assets that generated $2.75 million for Morgan Stanley at the time of his departure. He left the company on July 9 without notice. The complaint says these relationships were handled jointly with other Morgan Stanley advisors, adding that Crotty departed with his former clients’ sensitive information and that his conduct violated client privacy.
Before he left, the complaint says, Crotty began to solicit clients for UBS while still a Morgan Stanley employee. Crotty worked out of Boulder, Colo., but reported to the Shrewsbury, N.J., Morgan Stanley office, and worked for many New Jersey clients. Morgan Stanley says Crotty traveled to New Jersey in June and his Outlook calendar suggests he spoke to more than 30 of the company’s clients, including the one with the largest service relationship. Four clients told Morgan Stanley directly that Crotty announced to them his intentions of moving to UBS, according to the complaint.
“Crotty even had the audacity to submit his travel expenses, and the expenses he incurred meeting with clients, to Morgan Stanley for payment, even though he incurred all these expenses for the purpose of diverting Morgan Stanley clients to a competitor.”
One wealth management associate in the Shrewsbury office at Morgan Stanley filed a declaration with the court, saying she spoke with a client whose total assets with Morgan Stanley were $5 million. The client was called twice by Crotty, the associate said, one time on the day he resigned and one time afterward. Both times, he told the client he was sending a courier over to her with account transfer paperwork, the associate says. “The client told me she was uncomfortable, felt rushed and told Crotty not to send the courier.” After the second time, the client told Crotty not to call her again, the associate said.
In its request for injunctive relief, Morgan Stanley alleges breach of contract, breach of duty of loyalty and unfair competition. While such disputes must be resolved by arbitration before the Financial Industry Regulatory Authority, Morgan Stanley can seek injunctive relief in the from the federal court in the meantime to stop an advisor from soliciting clients or households or from using client information.
The complaint was filed in the United States District Court for the District of New Jersey. Attorneys for Crotty did not return phone calls, and a UBS spokesperson said the company and Crotty would not comment on the matter.