How FINRA Reps Should Act When Leaving One Firm and Joining Another

As noted in a recent Investment News Article where several Morgan Stanley brokers are being sued by JP Morgan Chase for allegedly defaming their prior employ JP Morgan Chase, one must be careful as to what one says to potential clients about one's prior firm, as whatever it is in must be accurate. Truth is an absolute defense to a defamation claim. Departing reps must balance risk (potential in being sued) vs. reward (obtaining clients) when deciding whether to say anything about your former firm to clients, even if true. Protocol should be followed in transitioning.  

Absent a non-disparagement agreement, there is no basis for a firm to sue a former repr for saying negative things about the former firm, as long as it is accurate. However, if false a statement asserted as fact, could be considered defamatory and such action can be pursued. 

The lesson learned is think long and hard about what you will say and wont say in contacting your former clients in trying to have them switch firms. Make sure you have backup for anything you do say and to the extent possible, keep it in the form of your opinion, as opinions cannot be defamatory.  If you are considering switching firms it is highly recommended that you retain your own counsel so as to guide you through the transition, and not rely on counsel of the new firm whose interest is for the firm, not you.

Word for the wise.

Regards,

Stuart D. Meissner Esq. 
Toll Free 866-764-3100