Schwab seeks legal action against advisor who allegedly solicited clients
After 13 years at Charles Schwab, advisor Alfredo Martinez faces a preliminary injunction in court ahead of a FINRA arbitration for allegedly engaging in “unlawful solicitation” of HNW clients.
Schwab is accusing Martinez — who is currently employed at LPL Financial — of breach of contract and misappropriation of trade secrets, according to a complaint filed in a federal court in Louisiana in July.
Martinez told Schwab he would be leaving the firm in late February, about two months before the firm sued two other ex-Schwab advisors for allegedly violating their non-solicitation agreements, among other accusations.
Schwab is now seeking legal action, alleging Martinez violated his own agreement. Under his contract, Martinez could not use any client information from Schwab to bring clients to his new firm. In addition, he was prohibited from telling clients he would be leaving Schwab for the purpose of encouraging them to follow.
At least two clients told Schwab they received calls from Martinez where he discussed his departure from the firm, according to the complaint.
“Martinez’s use of client information is contrary to his agreement even if he recreated the client information from memory after leaving Schwab,” the complaint reads.
Clients at Schwab’s brokerage belong to the company, not the financial consultants and registered advisors who work in its branches, according to the complaint. It also notes Martinez had been given pre-existing Schwab clients or qualified leads and had not developed his own book of business through cold calls, marketing efforts or his own connections.
"While we can't comment on particulars of this case, Schwab considers the protection of customer information and confidentiality to be of utmost importance, and expects that its representatives will comply with their contractual and legal obligations concerning customer information. However, if it becomes necessary, Schwab will not hesitate to enforce those obligations in a court or arbitration proceeding," said a Schwab spokesman in an emailed statement.
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Any Schwab clients Martinez had serviced or about whom he had gained “confidential information” across the state of Louisiana were off-limits for solicitation for 18 months after he left the company, according to the complaint. It included a document listing all 64 parishes in Louisiana that were off-limits under the agreement.
Schwab “has commenced a FINRA arbitration against Martinez seeking permanent injunctive relief and damages,” according to the complaint, which does not specify dates for the hearing.
Martinez and an LPL spokeswoman did not respond to a request for comment.