Even if they won in court, advisors would then be faced with trying to appeal to their former clients on a case-by-case basis.
The management of OSJs caught up in the deal are facing nervous representatives and angry subsidiaries. In some cases, parties are caught up in Finra or LPL regulations that make changing companies difficult. In one case, an incoming OSJ supervisor’s spouse already works for LPL, running afoul of LPL’s anti-nepotism rules.
One of the OSJ’s bank affiliates had just joined from LPL and balked at the prospect of going back.
Other offices are scrambling to make copies of all of their digital and intellectual assets in hopes of retaining ownership after the deal.
Observers claim that Finra has set a troubling precedent that favors large firms that pay a large share of the organization’s dues. For one thing, pre-approving block transfers between two immense broker-dealers enables more inexpensive, and thus more profitable, mergers and acquisitions for larger firms than for smaller firms.
“LPL is a 900-pound gorilla in the room, they can put a lot of pressure on everybody in lots of directions, and they will,” says one NPH OSJ manager. “Their job is to make the deal happen and put it together. The people at Jackson and what’s left of NPH are looking to get a payday. The rest of us in between are incidental or collateral damage in the deal.”
Smaller broker-dealers will not be able to compete for the ex-NPH representatives fairly due to the block transfers, thus distorting the marketplace.
Ressler argues that Finra has often favored larger broker-dealers over smaller firms, and that the organization should allow block transfers to any member firm to preserve a state of fair play.
“They should be creating an environment where broker-dealers have to continue to service and honor those relationships and take care of them,” says Nash. “Having block transfers available for advisors, all advisors industry-wide, would be really beneficial. It keeps the broker-dealers honest to the extent of providing extra services that attract and retain advisors, not creating barriers and walls to keep advisors in.”
Finra also appears to be favoring large member firms over the individual representatives and clients that it is also charged with protecting.