JPMorgan is taking a Morgan Stanley financial advisor to court over allegations that she has inappropriately poached 15 client households since switching firms earlier this year.
JPMorgan's brokerage subsidiary, J.P. Morgan Securities, filed suit in federal court in the eastern district of Michigan on Friday against Laura A. Sullivan, an advisor in Farmington Hills, Michigan, who moved to Morgan Stanley in May. Before changing firms, Sullivan had managed roughly $165 million for 232 household clients at JPMorgan, according to the suit.
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As a condition of her employment at JPMorgan and various firms eventually bought by it, Sullivan had signed contracts containing clauses forbidding her to solicit business from her former clients should she move to a competitor. JPMorgan's suit seeks a temporary restraining order that would bar her from reaching out to any more clients until the case can be resolved before a Financial Industry Regulatory Authority arbitration panel. FINRA arbitration is the required forum for settling disputes between brokers and brokerage firms.
Sullivan alleged to have accessed client data at night
JPMorgan says in its suit that more than a dozen of its clients have said Sullivan reached out to them after she resigned on May 15 and took up employment at Morgan Stanley later that same day. It also accuses Sullivan of using a computer at night to look at confidential client information shortly before her departure.
Starting around 9:30 p.m. on April 16, for instance, she accessed data for 20 clients, 14 of whom had more than $1 million in their accounts, according to the suit. A week later, beginning around 10:40 p.m., she viewed information for seven clients, JPMorgan says.
"On information and belief, Sullivan took the information with her from JPMorgan to Morgan Stanley (whether by taking photos of the information with her cell phone, or by some other means), and has used such information at Morgan Stanley to solicit JPMorgan clients," according to the suit.
JPMorgan says Sullivan has so far moved about 15 client households, with $14.5 million in assets total, to Morgan Stanley. Both firms declined to comment on the suit.
Sharron Ash, chief legal counsel at Hamburger Law, said anyone considering a departure should never forget that whatever they do on a work computer can be tracked, she said.
It's particularly suspect, Ash said, if advisors can be shown to have looked at large numbers of client files in relatively short stretches of time.
"What they are telling is that this advisor did this at a pace that just doesn't make sense in the context of pursuing normal business leads," she said.
Data misappropriation is a common accusation
Lawsuits over recruiting deals are common in an industry in which advisors are frequently changing employers.
In an unusually wide-ranging lawsuit filed in July 2024, Ameriprise accused its industry rival LPL Financial of using its recruiting practices to harvest confidential client information. The two firms eventually agreed to have a third-party forensic consultant come in and examine devices used by current LPL advisors formerly at Ameriprise for any evidence of data misappropriation.
Ash said these cases are a reminder that it's standard for employers to monitor their employees.
"You are always being watched," she said. "That's a lesson that advisors are continuing to learn, over and over."
Advisors should consider sticking to a 'tombstone' announcement
Scott Matasar, a founder of the law firm MatasarJacobs in Cleveland, said accusations in these sorts of cases should be taken with a grain of salt. JPMorgan's case against Sullivan would be stronger, he said, if JPMorgan had named some of the clients involved.
He said Sullivan could have a perfectly reasonable explanation for looking at so many investor accounts shortly before her departure.
"It seems to me that the direction this case takes will hinge on whether JPMorgan is able to compel the defendant to submit her phone, computer and any other personal electronic devices for a forensic examination to see whether, in fact, she misappropriated confidential information," he said.
When advisors move from one firm to another, they often communicate the move using what's known in the industry as a "tombstone letter." These messages usually are limited to listing the basic facts of a transition and avoid outright attempts to solicit former clients' business.
Matasar said JPMorgan's suit against Sullivan shows the risks advisors run when they do anything beyond sending out basic tombstone-type announcements.
"It is possible that Sullivan's calls to her former clients were perfectly innocuous, and that JPMorgan is misconstruing these conversations," he said. "But sending out tombstone letters, waiting for clients to call or email the departed advisor and then documenting those interactions on their [customer relationship management] system is always a lower risk — although perhaps lower reward — way to neutrally notify customers after an advisor changes firms."
JPMorgan alleges Sullivan got her clients through the firm
JPMorgan's suit accuses Sullivan of breach of contract, misappropriation of trade secrets, breach of her fiduciary duty and duty of loyalty and unfair competition, among other violations. The suit says Sullivan started her career in 2002 at Bank One, which was bought by JPMorgan roughly two years later.
Sullivan moved over to JPMorgan's securities subsidiary Chase Investment Services in 2010, first becoming a financial advisor associate and then a financial advisor. She was later named a private client advisor at Chase Wealth Management.
The lawsuit says Sullivan signed contracts with nonsolicitation clauses at many of the stops along her career journey. JPMorgan said the customer relationships she developed came directly through her position at the firm, rather than her own work to solicit clients.
"Sullivan sat at her desk at a JPMorgan Chase bank branch and was introduced to hundreds of existing bank clients (with or without investment accounts) to offer and provide access to investment opportunities through Chase Wealth Management," according to the suit. "As a Financial Advisor and a Private Client Advisor, Sullivan was not expected to engage in cold calling or attempt to build a client base independent of referrals from JPMorgan."
