June 6, 2022
I am not a fan of Wall Street Non-Compete/Non-Solicit agreements, which tend to be forced upon employees and are rarely, if ever, the byproduct of free and fair negotiation. All of which underscores that Wall Street's employment contracts are cynical take-it-or-leave-it propositions whereby the employer takes it all when the financial advisor leaves. Infuriatingly, the contribution of the men and women who cold call, open the new accounts, and service the customers is valued at next to nothing upon the cessation of the employment relationship.
Case in Point
In a FINRA Arbitration Statement of Claim filed in February 2021, FINRA member firm J.P. Morgan Securities, LLC asserted breaches of contract and duty of loyalty; intentional interference with actual and prospective economic advantages; and unfair competition. In the Matter of the Arbitration Between J.P. Morgan Securities, LLC, Claimant, v. Barry A. Krumwiede, Bryan L. Schneider, and Christopher J. Bowman, Respondents (FINRA Arbitration Award 21-00301)
As set forth in the FINRA Award, the causes of action related to Claimant J.P. Morgan Securities' ("JPMS'") allegations that "upon their separation from employment, Respondents breached employments [sic] agreements by soliciting Claimant's clients to move their accounts to an independent wealth management firm and a competitor of Claimant."
Respondents generally denied the allegations and asserted affirmative defenses. At the FINRA Arbitration hearing, Claimant JPMS sought the following monetary damages plus attorneys' fees:
- Krumwiede: $1,400,885
- Bowman: $179,081
- Schneider: $1,519,205
The FINRA Arbitration Panel denied Claimant JPMS' claims. In what might be an expression of the FINRA Arbitrators' views of the merits of Claimant JPMS' case, the Panel assessed the following fees solely against Claimant JPMS:
- $1,700 filing fee;
- $1,900 Member Surcharge;
- $3,750 Member Process Fee;
- $100 Pre-Hearing Cancellation Fees;
- $1,125 Postponement Fees;
- $1,800 Last-Minute Cancellation Fees; and
- $14,625 Hearing Session Fees
Bill Singer's Comment
You might be wondering why I reported about this FINRA Arbitration -- after all, it's not all that big a deal, you might think. Think again because it likely was a big deal. Maybe not to JPMS but I'm guessing that it was a big deal to associated persons Krumwiede, Schneider, and Bowman. According to FINRA online BrokerCheck records as of June 6, 2022:
Respondent Krumwiede was first registered in 1990 and was registered with Chase Investment Services Corp in 2005, and then was part of a Mass Transfer of registrations to JPMS in 2012; and he remained with JPMS until November 2019.
Respondent Schneider was first registered in 1998 and was registered with Chase Investment Services Corp in 2005, and then was part of a Mass Transfer of registrations to JPMS in 2012; and he remained with JPMS until November 2020.
Respondent Bowman was first registered in 2013 and was registered with JPMS in April 2013; and he remained with JPMS until August 2020.
JPMS came after the three former employees with guns blazing. Each former JPMS rep was accused of improperly soliciting former JPMS customers, and doing so in breach of their contracts and purported duty of loyalty. Here we are, June 2022, which is nearly a year and a half after Claimant JPMS filed its Statement of Claims. Imagine what much of the last two years must have been like for the Respondents. They got sued by their former employer. They incurred the expense of hiring a law firm. On top of all of that, the Respondents had to endure the Covid pandemic and its impact on their business and families.
There are times when a former employer may well be within its rights to go after a former employee. In such justified cases, the former employee may have stolen information from the former brokerage firm or may have defamed the firm. Looking through the sparse fact pattern in the FINRA Award, however, I just don't see anything indicating that Krumwiede, Schneider, and/or Bowman did anything other than leave JPMS and attempt to provide for their families and pursue their careers. Simply going by what is set out in the FINRA Arbitration Award, I'm glad that the FINRA arbitrators dismissed Claimant's case and tacked on some $25,000 in fees. To be blunt, to hell with JPMS.