Raymond James has called for an industry agreed protocol on restrictive covenants in IFA contracts, in the wake of its High Court victory over Towry.
Yesterday Raymond James and seven former Edward Jones advisers defeated Towry in a two year long court battle over alleged client solicitation.
Raymond James was also awarded its £1.2 million costs on an indemnity basis, meaning there is a high chance all the £1.2 million claimed will be recovered, with Towry ordered to pay £600,000 of it within 21 days.
Towry has not disclosed its costs for the case which centred on whether the seven former Edward Jones advisers had breached the terms of their contracts and solicited clients, in the aftermath of Towry’s acquisition of Edward Jones in 2009.
Much of the case focused on the nature of non-solicitation clauses, as in Towry adviser contracts, and non-dealing clauses, as in Edward Jones - and therefore the defendants - adviser contracts.
Speaking after the judgement Raymond James head of business development David Hazelton said the industry needed to have a set protocol on restrictive covenants as clients should be free to deal with whoever they liked.
‘This whole issue of restrictive covenants needs to be addressed,’ he said. ‘This has been a great case as it clarified some things, but the whole thing that has been forgotten in this is the client.
‘What we need to do is have some kind of industry protocol which makes sure that the start point is the client not the vested interest of either the adviser or the investment management firm.
‘What’s clear about this case is that there is a difference between a non-solicitation clause and a non-dealing clause. But even a non-dealing clause particularly with restrictions over 12 months is very much against the benefit of the customer who should be able to choose who they deal with.'
Hazleton is set to chair a working party set up by the Tax Incentivised Saving Association (Tisa) which will aim to achieve industry consensus on restrictive covenants.
‘It’s a topic that will be discussed at Tisa,’ he said. 'I chair that group, so will have to look at this from both sides and say “what’s the right thing for the clients”, and how do we work from there and make sure the advisers and the firms- who have legitimate interests- are making sure their businesses aren’t damaged.’
Raymond James was awarded costs on an indemnity basis due to Towry maintaining a claim for conspiracy on the part of the advisers which Mrs Justice Cox said was ‘wholly unsustainable on the evidence in this case’. She added that Towry had ‘not proved the allegations of wrongful conduct’ against the advisers.