JPMorgan reaches deal with ex-advisor now at LPL

An advisor who left JPMorgan for LPL Financial last month has agreed to cease soliciting his former clients until a legal dispute over his recruitment can be resolved in FINRA arbitration.

Matthew Madera, a broker with 13 years of industry experience working out of the Chicago suburb of Bolingbrook, Illinois, left JPMorgan on Oct. 6 and immediately joined Genesis Wealth, an affiliate of the independent broker-dealer LPL Financial. JPMorgan responded with a lawsuit on Nov. 4 accusing Madera of violating a nonsolicitation agreement barring him from reaching out to clients for a year after his resignation, misappropriating private client data and various other breaches.

In a stipulated order that JPMorgan also consented to last week, Madera said he would abide by the terms of a nonsolicitation agreement he had signed in 2012 and again in 2017. Madera agreed to abstain from reaching out to former clients either until his recruiting dispute could be resolved by a Financial Industry Regulatory Authority arbitration panel or the year-long ban on soliciting former clients had lapsed.

At the same time, the stipulated order — approved by federal judge Thomas M. Durkin for the Northern District of Illinois — does not prohibit Madera from all activities with his former clients, as long as he’s not the one initiating contact. He can still process “account transfer requests” or do business with “JPMorgan clients after their accounts transfer to him at LPL Financial LLC and/or Genesis Wealth.” 

JPMorgan and Madera both declined to comment. LPL Financial, which isn’t named as a defendant in the suit, also declined to comment.

JPMorgan’s pursuit of private client advisors

The case is the latest in a series of lawsuits JPMorgan has brought against former private client advisors recruited by industry rivals. Most of these suits, including one filed in September against an advisor in Michigan who left to join UBS, make the same claims against advisors: That since they obtained most of their clients from referrals through the firm’s bank branches rather than their own efforts, they’re not entitled to bring their book of business with them to an industry rival. 

“Madera sat at his 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,” JPMorgan alleges in language nearly identical to paragraphs found in other complaints against departed private client advisors.

Already moved 16 households, $12M in assets to LPL

JPMorgan said it learned from several of Madera’s former clients that he had reached out to them multiple times, often by cell phone. One said he had been called four times in about two weeks. Madera told other clients that he had access to better products and services at LPL, according to the complaint.

Madera’s allegedly improper solicitations have already resulted in 16 JPMorgan households and $12 million in assets moving to LPL. When he departed, Madera was working with about 270 JPMorgan households with approximately $127 million in assets under supervision.

Many times in wealth management, advisors’ ability to take client information from one firm to another is governed by an industry-spanning pact known as the Broker Protocol. The voluntary protocol provides advisors with a legal safehouse as long as they limit themselves to moving only client names, addresses, phone numbers, e-mail addresses and account titles.

Both JPMorgan and LPL Financial belong to the Broker Protocol. But JPMorgan has long maintained its protections mainly cover advisors who built their own books of business (instead of by bank referrals) and therefore don’t apply to its private client advisors.

Most of Madera’s clients had been with JPMorgan for decades

The complaint says Madera had been with JPMorgan or affiliated firms since 2011. He was a banker at JPMorgan Chase from 2011 to 2015, then left and returned three months later to become a client associate in the firm’s private bank. He became a private client advisor at Chase Wealth Management in 2017.

The complaint says most of the clients Madera was working with had been with JPMorgan or its affiliates for decades. More than half have relationships stretching back at least 20 years. 

“Thus, JPMorgan has a near-permanent relationship with the vast majority of the clients that JPMorgan assigned to Madera and whom he is now soliciting,” according to the complaint.

JPMorgan also noted that Madera could have used a form labeled “Attachment A” on his 2012 and 2017 nonsolicitation agreements to list any clients he had before joining JPMorgan. Those clients would then have been excluded from the firm’s nonsolicitation restrictions. But the attachments were left blank, according to JPMorgan’s complaint. Among other things, JPMorgan accuses Madera of breach of contract, breach of fiduciary duty, breach of the duty of loyalty and unfair competition.