Broker-Dealer agents and Investment Adviser Representatives frequently sign a host of legal documents when they join up with a B/D or RIA. Such documents may include:

  1. Independent Contractor Agreements
  2. Promissory Notes
  3. Stock Participation Plans
  4. Compliance Procedures Manuals

Unfortunately, Agents and Representatives, in my experience, sign these documents without much thought and almost always without the benefit of legal counsel.

When an Agent and a B/D or a Representative and an RIA decide to part ways, something akin to a divorce proceeding is often on the horizon.  Both sides often feel justified in taking impulsive actions that may have various legal consequences.  It is on this battlefield, either during or after the war, that our attorneys spend many of their days.  The file cabinets are flush with U-5 and promissory note matters.  Every now and then, however, an individual will call us on the eve of, rather than in the midst of or the aftermath of the fray.  This person’s foresight almost always pays in cost effective dividends.

Admittedly, legal counsel’s ability to satisfy the goals of the client are frequently limited by legally binding documents signed during the courtship or in the heat of the honeymoon.  Regardless, legal counsel may assist in navigating the choppy waters of a transition.  Impulsive actions in the areas of recruiting or even sabotage can be counseled against from a cool and objective perspective.  U-5 language, payment plans, and stock payouts can be negotiated.

If the transition is of the kind that will generate a regulatory inquiry, legal counsel will be able to familiarize themselves with the facts of the matter before the letter of inquiry arrives.

In sum, if you anticipate transition conflicts, or are even contemplating changing horses; seek out legal counsel.  If you are already midstream, seek faster.