Morgan Stanley Takes a UBS Sales Assistant to Court
Morgan Stanley went to federal court on May Day to enjoin a former sales assistant who had left the firm a year earlier from sharing information about its clients with her new colleagues at UBS Financial Services.
Filing such a notice in court rather than relying solely on an arbitration is raising legal eyebrows, as is the fact that the case was filed 12 months after the registered representative left Morgan Stanley’s Toledo, Ohio, branch, lawyers said.
Kelly Arndt, who joined UBS in April 2016 after seven-and-a-half years with Morgan Stanley, deleted client information she had retained on her cell phone when her former employer confronted her at the time of her resignation, according to the lawsuit filed on Monday in the U.S. District Court in the northern district of Ohio’s western division. It alleges that she has recently been soliciting clients of two brokers she formerly assisted directly and by sharing data with at least one UBS associate.
Reached at her UBS office, Arndt declined to comment.
“We’re having current issues with clients,” Morgan Stanley’s Toledo branch manager Scott Brown said, declining to comment further.
The firm learned in March 2017 that Arndt solicited a client, the lawsuit says, and also violated Morgan Stanley’s code of conduct by giving the name of one or more clients to Craig Warnimont, a broker who joined UBS contemporaneously with her last year but from a different firm.
When Morgan Stanley’s outside counsel demanded that Arndt sign an affidavit swearing she had no confidential information, UBS’s outside counsel responded that Warnimont had a prior relationship with the person he contacted from his previous job at Key Bank, according to the complaint. Warnimont told the client he got her name from a former Morgan Stanley employee, the complaint alleges.
Warnimont, whose BrokerCheck record indicates he once worked at NatCity Investments but had not been registered as a broker from 2005 until joining UBS last May, did not return a call for comment. Only Arndt is named as a defendant in the suit.
Brian Witus, a Birmingham, Michigan, lawyer representing Morgan Stanley, declined to comment except to say that as of Tuesday morning the court had not ruled on the injunction request.
The firm filed the lawsuit seeking the temporary injunction against Arndt at the same time that it is filing for “permanent relief” through the Financial Industry Regulatory Authority arbitration process, the lawsuit says.
“It’s surprising when any firm in the financial industry goes to court given the strength of mandatory predispute arbitration” agreements that employees sign, said Hugh Berkson, a Cleveland-based plaintiff’s lawyer, notinghe was not familiar with details of the case. “It seems like an abuse of the arbitration system but you have to see the underlying [employment] contract.”
Arndt, through UBS, is likely to ask the court to stay the the injunction request and compel arbitration, he said.