Many financial advisors will change firms and have the experience of moving their book of business. There are many potential pitfalls that can occur in moving a book of business – both from a regulatory prospective and from a civil litigation prospective.
From a regulatory prospective, when an advisor resigns, their registration is automatically suspended by the applicable regulator. The advisor requires a new firm to sponsor their registration before they can provide investment advice or investment related services. It is this transfer that can cause problems for an advisor in some cases. Typically, the advisor’s registration will be automatically approved and the process will seamless. However, in certain situations, such as when the advisor is under investigation by the firm from which he or she is departing, the registration can be delayed for weeks, or even months.
From a civil litigation perspective, any advisor who is seeking to move their book of business must first consider the issues that might arise when moving firms including, first and foremost, restrictions imposed on the departing advisor by their contract with the former dealer. Before leaving a firm, an advisor should review their existing obligations with respect to non-compete and non-solicitation restrictions.
A recent case before the Ontario Court of Appeal highlights the importance of non-solicitation obligations and the courts’ willingness to enforce them. In MD Physician Services Inc. v. Wisniewski, the Court of Appeal upheld a non-solicitation agreement. In this case the two advisors left MD Management Limited (“MD”) and moved to RBC Dominion Securities Inc. (“RBC DS”). The advisors were subject to a non-solicitation provision which prevented them from soliciting “the business of clients or prospective clients they had serviced or solicited while employed by [MD] for a period of two years after they left MD’s employ”.
The advisors did not take any client lists with them when they left MD. On their first day at RBC, they wrote a list of their former clients from memory. They then contacted these clients by phone advising them that they were no longer at MD and that they had moved to RBC DS. Significantly, the advisors did not invite the former clients to move their business, instead they paused in the conversation leaving it open for the client to ask for further information, opening the door for the advisors to try and retain the business.
The trial judge concluded that the manner of the call was a charade, stating:
I conclude that the telephone contacts made by Wisniewski and Sleeth during their early days at RBC DS, although made in the guise of simply informing their clients of their new place of employment, was meant to be, and became in substance, solicitation.
This finding, which was upheld by the Court of Appeal, demonstrates that courts are willing to look at the substance of the communication, or series of communications, and not just the form. This leaves advisors in a difficult position when faced with competing obligations to advise their clients of their departure from their firm and their new location while complying with their contractual post-employment obligations to their old firm. Depending on the language in the non-solicitation clause, advisors may be very limited in their options to let former clients know where they have gone. These situations are fraught with risk and advisors must tread carefully. Anyone in this position should get advice from counsel with expertise in the area before moving their book of business.
 The full scope of conduct that will attract regulator review can be found in Form 33-109F1, Item 5 and Form 33-109F4, Items 12-16. Answering “Yes” to any of these questions will generally result in further regulatory review.
 2018 ONCA 440
 Ibid. at para. 11.
 MD Physician Services Inc. v. Wisniewski, 2017 CanLII 47377 (Sup. Ct.) at para. 111.