Broker Protocol FAQs

Frequently Asked Questions About The Broker Protocol

Since 2004, the Protocol for Broker Recruiting (the “Protocol”) has helped registered representatives move to new firms while lessening the fear of impending legal action. The agreement, originally signed by Morgan Stanley, Merrill Lynch and UBS, covers employees in more than 1,000 firms nationwide.

Most employment agreements include restrictive covenants that limit or completely restrict registered representatives from soliciting their clients and bringing client contact information to their new firm. However, when both the registered representative’s current firm and new firm are members of the Broker Protocol, these provisions are not enforceable provided that the registered representative complies with all aspects of the Protocol.

It is critical that registered representatives who seek the Protocol’s protections fully and accurately comply with all of its provisions. Any errors on the part of the transitioning registered representative could cost them the protections provided by the Protocol, which may open them up to legal liability.

If you are considering switching firms, it is vital that you retain legal counsel to properly advise you on whether you can seek the protections of the Protocol, and if so, guide you on handling your transition under its terms. The securities attorneys at Lewitas Hyman provide comprehensive securities law counsel nationally for brokers, registered representatives and other financial professionals on various matters relating to the industry, including both Protocol and non-Protocol transitions.

Below is a list of frequently asked questions we hear from our clients relating to the Protocol. If you have additional questions, we invite you to contact our Chicago office at (312) 291-4600 to schedule a free consultation.

Who is covered by the Protocol?

The Protocol covers most registered representatives looking to move from one firm to another, provided that both your current firm and the firm you are joining are Protocol members. It does not cover employees who are not registered representatives.

Typically, all registered employees of a Protocol member firm are automatically covered by the Protocol. However, some firms may limit which registered employees may avail themselves to the Protocol’s protections. This is common with registered employees who work for banking institutions or brokerage firms affiliated with banking institutions. In these instances, the firm may have qualified its membership in the Protocol, meaning that the Protocol’s protections do not apply to clients who have banking relationships with the firm. This, therefore, limits the transitioning registered representative’s ability to bring information to the new firm about these banking customers that would otherwise be allowed under the Protocol.

This is a complex area of the law, and it is critical to consult with an attorney who understands the nuances that the Protocol may produce if you are looking to transition to a new firm.

What information can I take with me to my new firm?

Assuming your new and old firms are both signatories of the Protocol, you may bring limited information for clients you personally worked with, such as client names and phone numbers.

Financial professionals who seek to avail themselves of the Protocol’s protections cannot bring or otherwise obtain from the old firm any other information or documentation relating to the client accounts until you receive authorization from the client. This information includes but is not limited to account numbers and copies of account statements.

This is a simple, high-level overview of the process. Adhering to the terms of the Protocol is a complex process that demands an experienced securities law attorney’s guidance.

What happens if I breach the terms of the Protocol?

Registered representatives must follow every requirement of the Protocol. If you fail to do so, you can lose all of the Protocol’s protections.  As a result, the applicable terms of your employment agreement will govern, and you will subject yourself to liability resulting from any breach thereof.

Before submitting a resignation with your current firm in which you intend to seek the protections of the Protocol, you should consult with an experienced securities law firm to help you understand all of the Protocol’s requirements and counsel you on proper compliance.

I have been fired or suspect I will be fired. Can I leave my firm and seek the protections of the Protocol?

If you are fired, the Protocol does not apply to you, and you cannot invoke the benefits of the Protocol. If you suspect you will be fired shortly, you are strongly advised to seek legal counsel to explore your options. In most cases, you may still avail yourself of the Protocol and its protections if you resign before you are fired.

What happens if I do not immediately transition to a Protocol firm?

The Protocol only applies when you leave one Protocol member firm and immediately join another Protocol member firm. In cases where you are not immediately moving to a Protocol member firm, you cannot avail yourself of the Protocol’s protections.

I’m considering starting a new firm. Can my new firm join the Protocol?

Yes. Any firm (even an RIA) can join the Protocol. Before resigning from your old firm, the new firm must become a Protocol member firm.

What if my current firm or my new firm is not a Protocol member?

Unless both firms are signatories to the Protocol, you cannot seek its protections. In these cases, the restrictive covenants outlined in your employment agreement will govern unless you can establish that those restrictive covenants are unenforceable. Such a transition is generally known as a non-Protocol transition.  Non-Protocol transitions are common, and our firm can properly counsel you on how to make a successful transition. The key is to have a complete understanding of exactly what you can and cannot do in connection with your transition.

Our firm has substantial experience advising clients on both Protocol and non-Protocol transitions. If you have questions about the Broker Protocol or have other employment-related concerns, contact Lewitas Hyman at (312) 291-4600 or through our online contact form for a free consultation.