Recent Blog Posts

    • Stark & Stark Shareholder Comments on J.P. Morgan Suit Against Former Adviser Thomas B. Lewis, Chair of Stark & Stark’s Employment Group, was quoted in the August 17, 2010 article, J.P. Morgan sues former adviser. The article discusses J.P. Morgan Chase & Co’s recent decision to sue a former financial adviser who defected to Morgan Stanley Smith Barney. Since leaving, Michael Lupia has already transferred $30 million of client assets.   Mr. Lewis states that while Morgan Stanley is a signatory to Protocol for Broker Recruiting (which allows advisers to take basic client contact information when they change firms without fear of being sued) because JPMorgan is not, they are free to sue advisers and firms in these situations. ....
    • J.P. Morgan Sues Former Adviser Thomas B. Lewis, Chair of Stark & Stark Employment Litigation Group, was quoted in the July 7, 2010 Reuters.com article, J.P. Morgan sues former adviser. Mr. Lewis comments on the recent case filed by J.P. Morgan Chase & Co in response to a former advisor who left J.P. and took $30 million of client assets with him to Morgan Stanley Smith Barney. Mr. Lewis states that becuase J.P. Morgan is not a signatory to the Protocol for Broker Recruiting, they are fee to sue advisers as well as other firms.   You can read the full article online here. (PDF) ....
    • Now That You Have Created a New RIA, Do Not Forget That You Are an Employer Too Opening your own RIA can be an exhilarating experience.  No more administrative red tape, no more administrative paperwork - and the knowledge that you have escaped what is often times the bureaucratically oppressive climate of the major wire house.  Now it’s just you and maybe a few partners, some sales assistants and a secretary.  You can finally concentrate on your advisory practice.  But you maybe forgetting one thing – you are now an employer.  As a result, you are subject to a myriad of state and federal laws governing the employer/employee relationship between you and your staff.    Gone is the large Human Resources Department that dealt with most of the mundane issues and requirements of being an employer.  As a result, you will need to add the “employer hat” to the set of responsibilities that you gained when you left the wire house.  You are now responsible for issues ranging from sexual harassment policies ....
    • Stark & Stark Shareholder Comments on Smith Barney Raiding Case Thomas B. Lewis, Chair of Stark & Stark’s Employment Group, was quoted in the May 5, 2010 Dow Jones article, Finra Panel Throws Out Smith Barney Raiding Case. The article discusses the recent decision by the Financial Industry Regulatory Authority arbitration panel to throw out a case in which Smith Barney alleged raiding by a group of top-producing brokers and a boutique wealth management firm. Mr. Lewis states that the order stating that Smith Barney will have to pay for hearing fees sends a message to both parties that the claims never should have been brought. “Hearing fees are traditionally split between the parties,” he says. You can read the full article online here. ....
    • Stark & Stark Shareholder Comments on Reuters.com Article Thomas B. Lewis, Shareholder and Chair of Stark & Stark's Employment Group, was quoted in the April 30, 2010 Reuters.com article, Deutsche team goes to Barclays after suit settled.   The article discusses the recent move of a team of top advisers from Deutsche Bank Alex. Brown to Barclays Wealth on April 16, 2010. Issues quickly surfaced as Deutsche Bank AG alleged that the team had not given 60 days notice, as required by their employment contracts. Mr. Lewis states that neither Deutsche Bank nor Barclays are signatories to the Protocol of Broker Recruiting, and adds that, "These firms don't want to join the Protocol because they're afraid they will lose people en masse.”   You can read the full article online here.   ....
    • Advisers switching firms need a plan Thomas B. Lewis, Chair of Stark & Stark’s Employment Group, was quoted in the April 27, 2010 Reuters.com article, WEALTH MANAGER-Advisers switching firms need a plan. The article discusses the hardships advisers face when they have made the decision to leave their firm and head out on their own, the most troublesome issue: not being able to inform clients in advance. Mr. Lewis states that secrecy is essential - if an adviser tells his clients before he leaves his old firm, he can be sued for breaching his duty of loyalty. You can read the full article online here. ....
    • Enforceable Non-Compete Agreements: How Employers Can Adequately Define and Protect Their Legitimate Business Interests Thomas B. Lewis, Chair of Stark & Stark’s Employment Group, and Mark F. Kowal, member of Stark & Stark’s Employment Group, authored the article, Enforceable Non-Compete Agreements: How Employers Can Adequately Define and Protect Their Legitimate Business Interests, for the March 29, 2010 edition of the New Jersey Law Journal. The article discusses the necessity of a protectable business interest, how and when to enforce a non-compete, the necessity of consideration in non-competes, attorneys fees in non-competes, and the “blue pencil” (the courts ability to strike or modify overbroad or vague provisions from the agreement and enforce the other terms).   You can read the full article online here. (PDF) ....
    • Employer's Ability to Review Employee E-Mail Communications May Be Limited A recent New Jersey Supreme Court decision limits the circumstances where an employer may read an employee’s personal e-mails stored on a company’s computer system.  The Court recently held that a company policy is not enough to allow an employer unfettered access to electronic communications by an employee.  In Stengart v. Loving Care Agency, the plaintiff, a former employee of Loving Care, was provided a company-owned laptop computer for business use, which she returned to her employer when she resigned from her employment.  Stengart subsequently filed suit against the employer alleging violations of the New Jersey Law Against Discrimination (NJLAD).  In connection with the lawsuit, the employer hired an expert to create forensic images of the contents of the laptop’s hard-drive and discovered a number of e-mail communications between Stengart and her attorneys, exchanged via the plaintiff’s personal Web-based password protected e-mail ....
    • Non-Compete Agreements: How Employers can Define and Protect Their Legitimate Business Interests Thomas B. Lewis, Chair of Stark & Stark's Employment Litigation Group, and Mark F. Kowal, member of Stark & Stark's Employment Litigation Group authored the article, Non-Compete Agreements: How Employers can Define and Protect Their Legitimate Business Interests, for the March 2010 edition of Mercer Business Magazine.   The article discusses what employers should do when employees have left their company and have taken with them significant knowledge which they could share with a competitor or use to start their own business. Mr. Lewis and Mr. Kowal suggest that in order to defend the business and ensure long-term success, employers should have employees sign a non-compete agreement which will protect the employer from having an employee compete with them once they have left for a specific period of time and within a specific geographic region.   The article discusses several provisions commonly included in non-compete agreements, and factors used in determining ....
    • Deferred Compensation Agreements Should Be Reviewed, Again In late 2008 I wrote that deferred compensation plans or arrangements that are subject to Section 409A (which was added to the Internal Revenue Code pursuant to the American Jobs Creation Act of 2004) were required to be fully compliant with the final regulations under Section 409A by January 1, 2009. Thankfully, in January of this year (2010), the Internal Revenue Service (IRS) issued Notice 2010-6, which provided guidance for certain plans that have “document failures.”   “Document failures” exist when the plan or arrangement fails to comply with Section 409A in “form.”  For example, Section 409A allows for payment of deferred compensation only upon specific events, including death, disability, separation from service, change in control, unforeseen emergency and a specified date or fixed schedule. Payment events other than those listed above do not comply with Section 409A. In the event that the plan or arrangement fails to comply with ....
    • Stark & Stark Shareholder Comments on Protocol Overhaul Thomas B. Lewis, Chair of Stark & Stark's Employment Group, was quoted in the February 26, 2010 Registered Rep article, Some Predict Broker Protocol Overhaul. The article addresses the possibility of an overhaul to the Protocol for Broker Recruiting in the wake of increased lawsuits and constant movement of advisors as they switch firms. When the protocol was first created, it was an exclusive pact between three wirehouse firms put in place to prevent expensive litigation every time an advisor switches firms. Today, there are approximately 420 signatories to the agreement, and recently, some firms are adding letters to clarify their participation in the protocol.   Mr. Lewis states that it could become very unruly if each company began including its own letters and sets its own rules as to compliance or noncompliance with the protocol. Mr. Lewis believes that the protocol will become ineffective at that point, and something has to be done as to the clarification letters ....
    • Stark & Stark Shareholder Comments on Increase in Suits in Response to Protocol for Broker Recruiting Thomas B. Lewis, Chair of Stark & Stark's Employment Group, was quoted in the February 24, 2010 FinancialPlanning.com article, The Recruiting Wars Turn Nasty. The article discusses the Protocol for Broker Recruiting and the recent decrease in firms suing each other over poached advisors. The article goes on to discuss some of the recent more highly publicized cases which have advisors, and their attorneys, questioning whether or not the days of increased claims and counterclaims are about to return. Mr. Lewis discusses the fact that both Goldman Sachs and Credit Suisse have not signed on to the protocol, and Mr. Lewis states that Goldman Sachs in particular takes the attitude that the clients belong to the firm, not the advisor, and therefore should not move if an advisor defects. You can read the full article here. (PDF)   ....
    • Stark & Stark Shareholder Comments on Goldman Sachs Suit Thomas B. Lewis, Chair of Stark & Stark's Employment Group, was quoted in the February 19, 2010 On Wall Street article, Goldman Drops Case Against Former Advisors. The article discusses Goldman Sachs' recent decision to drop their case against five former financial advisors and two support staff members (David Greene, Craig Savage, Andrew Thompson, Sharran Srivatsaa, John Pitt, Stephanie Dennard and Kim Tyson). The suit accused the advisors of breaching their non-solicitation agreements by moving to rival firm, Credit Suisse, and attempted to take their clients with them.   Mr. Lewis states that these types of cases are typically settled quickly and the firm who poached the advisors will often agree to pay a portion of the revenue generated by any of the accounts that the advisors’ transferred over for a period of 12 months to their prior firm.   You can read the full article online here. ....
    • Stark & Stark Employment Group Chair Comments on Protocol for Broker Recruiting Stark & Stark Employment Group Chair, Thomas B. Lewis, was quoted in the January 20, 2010 RIABiz.com article, Broker protocol may be endangered by complexities as membership starts to explode. Although recently, a large number of firms have joined the Protocol for Broker Recruiting, three big companies have put limits on the extent to which the no-fault poaching truce applies to them. Though the restrictions have so far been fairly minimal, the number of signatories and the addendum letters by Merrill Lynch, LPL and Ameriprise are raising questions in some lawyers’ minds about whether the Protocol may eventually become difficult to use. Mr. Lewis states, “You have such an explosion of members, it’s become unwieldy. What’s happening now is that there are certain companies that are trying to limit their exposure under the Protocol, which makes it even more unwieldy.” You can read the full article here. (PDF) ....
    • Stark & Stark Shareholder Comments on Citigroup's Motion To Dismiss In Bonus Pay Class Action Thomas B. Lewis, Shareholder and Chair of Stark & Stark's Employment Group, was quoted in the January 14, 2010 RegisteredRep.com article, Citi Files Motion To Dismiss In Bonus Pay Class Action. The article discusses Citigroup's recent decision to file a motion to dismiss a class action lawsuit filed against the firm over the terms of its financial advisor bonus pay agreements. The motion was filed with the U.S. District Court for the Southern District of New York this past Monday, January 11, 2010.   Mr. Lewis states that there is a good chance that the court will dismiss the complaint, and goes on to say, “realistically it’s an issue that’s subject to FINRA’s jurisdiction. The plaintiffs tried to get out of the FINRA arbitration by getting class action status for the case. But courts are reluctant to get involved if there is FINRA jurisdiction.”   You can read the full article online here. (PDF) ....
    • Genetic Information Non-Discrimination Act “GINA” (the “Genetic Information Non-Discrimination Act”) was signed into law on May 21, 2008 by President George Bush.  It became effective a few days ago on November 21, 2009, at least with regard to its employment provisions (its health insurance provisions have been in place since May 21, 2009).  Employers need to know that GINA prohibits them from requiring genetic test information from job applicants.  More importantly, and less obviously, the Act prohibits potential employers from seeking out and gathering information – even information in the public domain such as on the Internet - regarding job applicants.  While inadvertent acquisition of genetic information regarding a job applicant is not a violation of the Act, employers do not want to get into a situation where they need to explain why they have gathered genetic/medical information about their employees.  The information about the employee’s close relatives can ....
    • RIAs drive explosive growth of the Broker Protocol Stark & Stark Employment Group Chair, Thomas B. Lewis, was quoted in the November 17, 2009 RIABiz.com article, RIAs drive explosive growth of the Broker Protocol. The article discusses the recent rise in firms who have signed the Protocol for Broker Recruiting and what this truce will mean for changes in wirehouses across the country. Mr. Lewis states that he expects the growth in the number of firms signing the Protocol to continue, and states that as more sign on, there’s even more incentive to join.   You can read the full article online here. ....
    • It's Payback Time on Promissory Notes Stark & Stark Employment Group Chair, Thomas B. Lewis, authored the article, It's Payback Time on Promissory Notes, for the November 2009 edition of On Wall Street Magazine. The article discusses the recent trend in unhappy advisors seeking new firms in the wake of a down market and their old firm's enforcement of collecting promissory notes.   Mr. Lewis states a common misconception that advisors believe their firms will accept 50% repayment of a promissory note, when in reality, this is not the case. Mr. Lewis goes on to discuss the new procedures put in place by the Financial Industry Regulatory Authority (FINRA), the possible defenses advisors could use in promissory note arbitration, and a discussion on how the Protocol for Broker Recruiting will impact the future of promissory note collection.   You can read the full article online here.   ....
    • Stark & Stark Shareholder Comments on FINRA Expulsion Stark & Stark Employment Group Chair, Thomas B. Lewis, was quoted in the October 19, 2009 Wall Street Journal article, COMPLIANCE WATCH: Expulsion Shows Risks Of Outside Accounts.   The article discusses the recent expulsion of Miguel A. Chavez by the Financial Industry Regulatory Authority (FINRA). The expulsion comes as a result of Chavez's association with firms that sell securities after he opened an outisde account and did not inform his employer of the account. Mr. Lewis states that brokers who are contemplating a job change may want to move their assets to another brokerage if they anticipate a dispute about money owed for a signing or retention bonus, which are typically secured by promissory notes.   You can read the full article oline here. (PDF) ....
    • Be Clear With Your Company Email Policy In a recent New Jersey Appellate Division Decision, Stengart vs. Loving Care Agency, Inc., the New Jersey Superior Court, Appellate Division, clarified when a company/employer can review and access an employee’s emails when the employee uses company technology to receive emails.  Many employees mistakenly believe that personal emails received on a company computer are private.  The Stengart case provides guidance on how email and internet policies should be drafted in the company/employee handbook.  The law holds that electronic communication policies must be drafted with unambiguous language alerting employees that the employer retains the right to monitor and review emails of the employee for any legitimate business purpose.  Although the Stengart Court did find that the company’s electronic communication policy was subject to claims of ambiguity, it is clear that a well-drafted electronic communication policy will properly advise the employee that ....
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