Hybrid transitions occur where part of the advisor's book is subject to the Broker Protocol and part of the book is non-protocol and subject to non-solicitation or non-compete obligations. What is an advisor or broker to do under these situations?
In a hybrid transition scenario, a broker may be moving to a new firm where part of their client base is subject to the Broker Protocol, while another part is not, and is instead subject to non-solicitation or non-compete obligations. Navigating this situation requires careful attention to compliance with both the Broker Protocol and the non-solicitation or non-compete agreements.
Broker Protocol Clients: For clients who fall under the Broker Protocol, the broker should follow the standard protocol compliance procedures, as mentioned in a previous blog post. This includes providing written resignation, taking only the allowed Protocol Information, providing detailed notice of the client information being taken, and adhering to the restrictions on the use of client information at the new firm.
Non-Protocol Clients with Non-Solicitation or Non-Compete Obligations: For clients not subject to the Broker Protocol and who are instead governed by non-solicitation or non-compete agreements, the broker must abide by the specific terms of those agreements. This may involve not soliciting or contacting the clients for a certain period or within a specified geographical area, depending on the terms of the agreement.
To manage a hybrid transition effectively, the broker should consider the following steps:
a. Segregate Client Lists: Create separate lists of clients who fall under the Broker Protocol and those who are subject to non-solicitation or non-compete agreements. This will help ensure that the appropriate procedures are followed for each group.
b. Review Non-Solicitation and Non-Compete Agreements: Carefully review any non-solicitation or non-compete agreements to understand the specific restrictions and conditions. Consult with legal counsel if necessary to clarify any ambiguities or uncertainties.
c. Develop a Bifurcated Communication Strategy: Develop a strategy for communicating with clients who are subject to non-solicitation or non-compete agreements, if and when it is permitted under the terms of those agreements. This may involve waiting for a certain period before contacting clients or using a different communication approach that complies with the restrictions.
d. Training and Compliance: Ensure that the new firm is aware of the hybrid nature of the transition and that they have appropriate compliance procedures in place to manage the different client groups. Provide training to the broker and support staff to ensure they understand the different requirements and restrictions associated with each group of clients.
e. Monitor Compliance: Regularly monitor and review compliance with both the Broker Protocol and the non-solicitation or non-compete agreements to ensure that all legal and regulatory obligations are being met.
Through planning, fully understanding your obligations and following the steps outlined by counsel, a broker or adviser can successfully navigate a hybrid transition, mitigating potential legal and regulatory risks and ensuring a smooth transition for both themselves and their clients.
Abell Law is experienced in coordinating hybrid transitions and can help you plan a compliant and efficient move.
Disclaimer: The information provided in this blog post is for general informational purposes only and is not intended to be, nor should it be considered as legal advice. The opinions and perspectives expressed in this post are those of the author and may not necessarily reflect the views of the law firm. For specific legal guidance or advice regarding your individual circumstances, please consult with an attorney. The use of the information contained in this blog post or any reliance on the content herein does not create an attorney-client relationship. Please be aware that any review, distribution, or copying of this post and its contents is strictly prohibited. In some jurisdictions, these materials may be considered attorney advertising.
Commenti