Investment advisors are not breaching their employment obligations if they entertain employment offers from other brokerages and do not inform their employer of the terms of those offers, says the B.C. Court of Appeal.
Advisors should give proper notice of their departure, and should not copy client records to take to their new place of employment, the BCCA decided in RBC Dominion Securities Inc. v. Merrill Lynch Canada Inc., a decision released on Friday.
However, they are not committing a breach of their employment obligations if they make a list of their clients’ names, addresses, telephone numbers, and email addresses, the BCCA decided.
“To hold in the 21st century that an advisor, who usually, by considerable personal diligence, has built up a book of business, must rely on his memory for the full names, addresses, telephone numbers and e-mail addresses of his clients, is not, in my opinion, in the interests of the clients and, therefore, is not in the public interest,” writes Madam Justice Mary Southin in the BCCA judgment.
“I emphasize ‘his own book of business.’ He is not entitled to take a list of other advisors’ clients. To put it another way, the interests of the brokerage house should not be put ahead of the interests of the clients.”
An advisor is also not entitled to take copies of account statements and other papers concerning the client, such as the “Know Your Client” form, writes Southin.
The facts of this case arose in 2000, when Merrill Lynch and one of its managers, offered various inducements to nine brokers, including the branch manager, in the RBC DS office in Cranbrook, B.C. They subsequently left without giving notice to RBC DS. They also took client records with them to copy — before returning them.
“Depending upon one’s point of view, one can characterize the conduct of Merrill Lynch as either poaching or headhunting,” writes Southin. “To the ‘game,’ this may have been nothing more than an invitation to better themselves economically, which each of us is entitled to do with certain limitations. In our capitalist society, the pursuit of self-interest is not, in and of itself, actionable. Thus, the broad legal question in all of this is whether there is something which is actionable, and, if there is something which is actionable, what is the proper measure of the damages?”
Justice Southin overturned the 2004 decision, made by the province’s trial court, which resulted in a $2 million award to RBC DS. Damages against the departing staff for future loss of profits were set aside.
However, she maintained the trial court’s decision to award RBC DS $265,000 in punitive damages for taking and copying client records. She also awarded RBC DS damages of approximately $40,000 for the lack of proper notice.
Appeal court overturns damage award against advisors for switching firms
Advisors allowed to take list of “book of business”
- By: Stewart Lewis
- January 15, 2007 January 15, 2007
- 13:25