(Updates with comments from a lawyer)
By Suzanne Barlyn
NEW YORK, Dec 22 (Reuters) - An arbitration panel has ruled that a former Merrill Lynch adviser, who left the firm to join U.S. Bancorp Investments Inc, cannot solicit business from his former clients for one year.
Chad Roy Sillman, formerly an adviser in Las Vegas for Merrill Lynch, a Bank of America Corp. (BAC.N) unit, took large amounts of customer data and proprietary information when he left the firm in October to join US Bancorp (USB.N), according to documents Merrill filed in a Nevada state court.
A Financial Industry Regulatory Authority Panel, on Dec 16, ruled that Sillman cannot solicit his former Merrill clients until October 21, 2012, but allowed him to engage in more generalized advertising and mailings that are not targeted to specific Merrill clients.
Spokespeople for Merrill Lynch and U.S. Bancorp declined to comment. Sillman couldn’t be immediately reached for comment.
The case highlights the risks that advisers take when they move between firms that have not both agreed to the Protocol for Broker Recruiting, or “the Protocol,” an agreement intended to minimize legal disputes.
Firms that participate agree not to sue each other when brokers leave, as long as the brokers stick to rules about the type of client information they bring to their new firm. Those details are basic and include client names, mailing addresses and telephone numbers.
U.S. Bancorp doesn’t participate in the Protocol.
But the FINRA panel ruling could have turned out far worse for Sillman, said V. Michael Arias, a lawyer in Coral Gables, Florida who represents brokers in disputes with their employers. The panel, for example, didn’t permanently halt Sillman from soliciting former clients nor did it require him to return information to Merrill Lynch, said Arias, who reviewed the ruling.
The panel’s blessing for Arias to use certain generalized advertisements would allow him to mail new contact information to former clients, as he didn’t request their business and also sent the details to other people, he said.
“What is the damage to him? Basically nothing,” he said.
The legal wrangling about Sillman began in October when Merrill filed a court action in Nevada to request that Sillman be temporarily halted from soliciting former clients until FINRA arbitrators ruled in the case.
Sillman managed more than $43 million in assets which generated over $400,000 in commission revenue for Merrill Lynch during the preceding 12 months, according to the court filing. (Editing by Bernadette Baum)