Law firm Faegre Baker Daniels says more firms will look to impose non-dealing clauses in their adviser contracts in the wake of the Towry V Raymond James High Court case this week.
Faegre Baker Daniels, which represented Raymond James, says the case illustrates the clear distinction between non-solicitation and non-dealing contract clauses.
Litigation partner Robert Campbell says: “In order to prove breach of a non-solicitation clause, the evidential burden is far greater than it is in relation to a non-dealing clause.
“It may be that one of the results of this judgment is that employers will seek to impose non-dealing clauses rather than non-solicitation clauses. In this case there were non-solicitation clauses in place but a very significant number of clients migrated away from Towry to Raymond James without breaching those covenants.”
Towry chief executive Andrew Fisher says: “The contracts of the former Edward Jones employees were materially different to our standard Towry contracts in that they did not contain a non-dealing clause and we are confident that our current Towry contracts afford us appropriate commercial protection.”
Raymond James head of business development David Hazelton is working through his role at the Tax Incentivised Savings Association to form an industry consensus on restrictive convenants.
He says: “There are a lot of vested interests here. There are the advisers who have the view that they are under covenants that are too strict and should be less onerous, while at the other end there are consolidators that are buying businesses for lots of money and want to be able to keep the clients.”