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Non-deal is the clause of choice

Law firm Faegre Baker Daniels says firms are looking to impose non-dealing clauses rather than non-solicitation clauses on advisers because it is easier to prove when an adviser has breached their contract.

Speaking at the Tax Incentivised Savings Association client retention seminar in London last week, Faegre partner Robert Campbell said it is hard to find evidence of a breach of a non-solicitation clause.

Campbell said: “The attraction of a non-dealing clause is that it is a more specific agreement and it is clearer to the court that everybody understands what the agreement is and it is more difficult for people to say they did not understand it.

“It is harder to prove any breach of a non-solicitation clause because you have to prove that the adviser approached the client.”

Also speaking at the seminar, Towry chief executive Andrew Fisher said the firm imposes a non-dealing clause on its advisers because it is easier to enforce.

He said: “One of the lessons we have learnt is that non-solicitation is very difficult to prove, so we have gone down the route of putting non-dealing clauses into place.”

In the US, broker protocol was developed in 2004 to reduce litigation and forego the enforcement of restrictive covenants.

Under the protocol, a departing adviser can retain information about a client but this is restricted to the client’s name, address, phone or fax number, email address and type of account.

The adviser is allowed to tell clients they have moved firm and it is then up to the client to choose whether they stay with the firm or move with the adviser.

Raymond James Financial, the American parent company of Raymond James Investment Services, says its legal costs on staff moves have been slashed by 70 to 80 per cent since the protocol was introduced.

Raymond James Financial deputy general counsel Mike Alford said: “There was previously a lot of money spent on litigation when advisers were moving between firms but, as a result of the broker protocol, Raymond James managed to reduce this by 70 to 80 per cent.”


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