Seven members of a UBS wealth management team in the US that left to join a competing firm are now being sued in the United States by their old employer.
Last month, a team of 15 wealth managers from Promus Wealth Management in Indianapolis managing $1.5 billion left UBS Financial Services for RBC Wealth Management. It was one of the largest ever to join RBC, the Canadian firm that manages about $500 billion in the US, according to a story in the «Indianapolis Business Journal» (behind paywall).
UBS is now suing seven members of the team saying they contacted UBS clients to lure them to RBC in violation of confidentiality and nonsolicitation agreements. According to the report, the team generated over $8 million in revenue annually for the Swiss bank.
The lawsuit, filed in the US district court for the Southern District of Indianapolis, also alleges RBC offered the team $16 million to lure them to the firm with an incentive for an additional $8 million should certain revenue goals be met.
RBC Wealth Management has its US headquarters in Minneapolis with $510 billion under management and is a subsidiary of the Royal Bank of Canada, based in Toronto. RBS is not a party to the lawsuit.
Restraining Order
UBS asked the court to issue a temporary restraining order and injunction for the defendants to cease soliciting clients. It also filed arbitration claims with the Financial Regulatory Authority FINRA against the defendants. There, an arbitration panel would be the venue for hearing the despite and if UBS is entitled to damages.
A Significant Group
A local attorney, Keith Griffin, who is not involved in the case said that it is not unusual for a firm to sue departed brokers if in their view the departees are soliciting clients from their former firm. For Griffin, what makes the case unusual is the speed at which the lawsuit was filed by UBS, and shows how willing UBS is to stop the activity.
It's not merely a single broker seeking greener pastures, but the Promus team «is a significant group,» he said.
Allegations from UBS
The defendants are accused by UBS of using the Swiss bank's resources to hold meetings with UBS clients shortly after they resigned. A meeting on October 27, came just hours after tendering their resignations.
The complaint alleges the defendants still took the meetings even after being informed by UBS it would violate non-solicitation agreements. In addition, nearly 6,000 pages of documents were printed the week before leaving the firm. As a basis for comparison, the Promus team printed 2,400 pages.
In its complaint, UBS said «The actions of Defendants have damaged the financial viability of UBS’s Indianapolis office because they have solicited UBS customers representing a significant amount of assets, as well as caused non-compensable damages to UBS’s business reputation and the goodwill it has developed at great effort and expense over the years,» according to the report.
