Law360 reports that Charles Schwab & Co. has sued a former employee, alleging he violated his contract with the company by stealing confidential client information and trade secrets to help launch his own rival company. Read more on Law360.com (subscription required).
4 thoughts on “Charles Schwab Accuses Ex-Employee of Stealing Confidential Info”
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Info on the case can be found here (if my link works). This suit is an example of a once common anti-competitive tactic of major brokerage firms, although Charles Schwab had not pursued departing advisors as aggressively as traditional wirehouses (e.g., Merrill Lynch, Smith Barney) in the past. To help mitigate the costs of pursuing these lawsuits many industry participants have agreed to a protocol that outlines permissible actions for departing brokers (see http://www.thebrokerprotocol.com/read-the-broker-protocol), which also may protect clients’ privacy and right to choose their own adviser. It doesn’t appear that Schwab is a current protocol participant, but even so, courts have found that this protocol can even be applied to non-participants and has thrown out lawsuits because of the protocol’s existence. I also know, from personal experience, that the accusation in lawsuits of this type are not necessarily factual, as the plaintiff throws a lot of stuff into the suit in order to convince a judge to issue a temporary restraining order against the offending broker. In other words, Mr. Castro, the ex-employee, may not have “stolen” any confidential information and may only be contacting former clients to see if they would be willing to continue working with them at his/her new firm. If Mr. Castro did violate the terms of the protocol, it will be interesting to see how new privacy laws will be applied in this situation.
Thanks for posting a link to more info.
I’ve spoken to Clinton Marrs who is the attorney for Christoper Canorro, the named defendant in the Schwab case. He stated that Canorro took no information with him since Schwab does not participate in the broker protocol agreement that lets employees access their client data at new firms. Instead, he said this was an intimidation tactic to keep financial consultants from leaving the firm. I guess a court will decide if any data breach existed or can be confirmed.
Thanks for staying on and digging into all these breaches, Jeanne – and for sharing what you find here.