JPMorgan Chase has taken legal action against former financial advisor Russell Loesch, who managed $800 million in client assets, accusing him of breaching non-solicitation agreements upon joining competitor Morgan Stanley.
The lawsuit, filed last week in New York state court and accompanied by a private arbitration claim, alleges breach of contract and misappropriation of trade secrets. Loesch has denied all allegations.
Preliminary Agreement Reached
On June 11, the dispute saw a preliminary resolution with a stipulated injunction. The agreement prohibits Loesch from soliciting JPMorgan clients but allows him to serve clients who independently transfer their accounts to Morgan Stanley. The core issues will now be addressed in arbitration through Finra, the industry's self-regulatory body.
Jonathan Thau, Loesch’s legal counsel, maintains his client acted within legal and ethical boundaries. “Mr. Loesch made his transition in full compliance with his obligations and rejects any allegations to the contrary. He remains focused on serving his clients professionally,” Thau stated. JPMorgan declined to comment, while Morgan Stanley representatives were unavailable for immediate response.
JPMorgan’s Wealth Management Push
The case highlights JPMorgan’s broader effort to expand its wealth management division. In recent years, the bank has aggressively recruited bank-based advisors, offering them client referrals from its vast customer base. These advisors typically sign non-solicitation agreements as part of their employment contracts.
Loesch, who worked at JPMorgan from 2005 until his resignation on May 30, operated out of Midtown Manhattan. According to court documents, his role heavily relied on internal referrals rather than independent client acquisition, a model that JPMorgan has sought to protect through legal enforcement.
Allegations of Misconduct
JPMorgan alleges that Loesch violated his one-year non-solicitation agreement by contacting clients and encouraging them to transfer their accounts to Morgan Stanley. The lawsuit accuses him of offering lower fees and improperly retaining confidential client information.
The bank further claims that in the months leading up to his departure, Loesch accessed a high volume of client profiles during non-business hours. These profiles allegedly contained sensitive contact details, raising concerns about potential misuse.
Since Loesch’s resignation, 20 clients, representing $35 million in assets, have transferred or are in the process of transferring their accounts to Morgan Stanley. At the time of his departure, Loesch managed 459 client households.
Loesch’s Defense
Loesch, in his affidavit, refutes JPMorgan’s allegations, stating he reached out to some clients solely to inform them of his new position. He denies soliciting business or retaining any client information. Addressing the accusations of late-hour system access, he explains that market volatility in March and April required extensive after-hours preparation for client meetings.
Loesch also claims that JPMorgan failed to provide his updated contact information to clients, despite being obligated to do so under Finra rules. He asserts that he included his contact details in his resignation letter.
Broader Implications
This case is not an isolated incident. JPMorgan has pursued similar lawsuits against former advisors who joined competitors, signaling a stringent approach to protecting its wealth management assets. The legal battle underscores the competitive pressures in the financial advisory industry, where client retention and acquisition are critical.
Looking Ahead
The outcome of this case, now shifting to Finra arbitration, will serve as a litmus test for the enforceability of non-solicitation agreements in the evolving wealth management landscape. As firms like JPMorgan and Morgan Stanley vie for top talent and high-net-worth clients, legal disputes of this nature may become increasingly common.
For wealth advisors and RIAs, the case underscores the importance of understanding employment agreements and the potential legal ramifications of transitions between firms. While clients’ right to choose their advisors remains paramount, firms are likely to continue leveraging legal tools to safeguard their client bases.
