Raymond James: FSA must probe TCF of non-dealing clauses
Firm claims regulator should look into non-dealing contracts in relation to Treating Customers Fairly principles.
A spokesman for Raymond James claimed the rejection of wealth manager Towry’s bid for damages over claims of client poaching raised questions about whether non-dealing contracts met the FSA’s Treating Customers Fairly requirements.
On Tuesday (14 February), Towry lost its court case against Raymond James and its seven former Edward Jones advisers. It was seeking almost £6m in damages, alleging that the advisers poached clients after Towry took the firm over in 2009.
A judgement from Mrs Justice Cox at the Royal Courts of Justice found in favour of Raymond James, dismissing all charges and awarding £1.2m in damages on an indemnity basis.
David Hazelton, head of business development at Raymond James Investment Services, said the ruling raised questions over non-dealing contracts and the way these agreements dictate the client’s choice.
He said: “Non-dealing clauses in employment contracts limit the clients’ choice. Does the client know when they sign up with a firm that if the wealth manager they grow to know and trust leaves to join another firm, they can’t deal with him again?
“This cannot be seen as an acceptable approach to Treating Customers Fairly... non-dealing clauses have the potential to be highly destructive of client trust because firms are effectively saying to the client that their commercial interests are more important than the client’s wishes.
“For clarity, Raymond James does not have restrictive covenants within the contracts we use. Wealth managers come to us so that they can develop, grow and commercially ‘own’ their client book no matter what happens in the future.
“On this issue, wealth managers and firms need to unite and agree a protocol that allows wealth managers to move from one firm to another, recognising the reality the investors may want to continue working with their existing wealth manager.
“A non-solicitation covenant would exist within the protocol to protect the firm but the best interests of the clients would also be protected.”
FTAdviser asked the FSA about whether it had concerns about non-dealing contracts following the court ruling, but the regulator declined to comment and simply directed enquiries towards the Treating Customers Fairly page on its website.
FTAdviser could not find anything about client ownership in the FSA’s TCF rules. The FSA’s website states it expects firms to be able to demonstrate they are consistently delivering fair outcomes to consumers.
A spokesperson for Towry said the judge found that non-solicitation and non-dealing clauses were reasonable contractual clauses and that, in general, they were appropriate and enforceable for the ongoing protection of the commercial interests of businesses.
Speaking following the announcement of the verdict on tuesday, Andrew Fisher, chief executive of Towry, said: ““The judgment does support the efforts of professional services firms like ours, to protect their legitimate business interests, through contractual non-solicitation, non-dealing and confidentiality clauses.”