Another Departing Advisor Tries To Steal Clients, This Time To The Tune Of A $765k Penalty

Client relationships are often the most valuable asset a business owns. In industries like financial services, those relationships are built over time through trust, data, and personalized service. 

We recently shared the story of a former JPMorgan Chase advisor who attempted to poach clients using trade secrets. That advisor is far from alone. In another recent case, a court ordered a departing financial advisor to pay upwards of $765,000 for taking and using a proprietary client list.

While these cases arise in the financial advisory space, the lessons apply broadly to any business that relies on customer data, relationships, or proprietary information.

What happened? Let’s dive in.

The Dispute Over a Client List

In this case – much like the other one – the financial advisor left his firm and took steps to solicit clients from his former employer by using information obtained during his employment. The court found that the advisor improperly used confidential client information, including contact details and relationships developed while at the firm, to compete after his departure.

The result? A substantial damages award exceeding $765,000, reflecting both the value of the lost business and the seriousness of the misconduct.

This outcome highlights how courts view client lists and related data when they are treated as confidential and integral to a company’s operations.

What makes client information proprietary?

Once Again: When Client Information Becomes a Trade Secret

Not all client lists are protected under the law. However, when certain conditions are met, they may qualify as trade secrets.

These conditions often include:

• The information not being publicly available
• The business deriving economic value from keeping it confidential
• The company taking reasonable steps to protect it

In many professional service industries, client lists go beyond basic contact information. Lists may include detailed profiles, financial data, personal preferences, and historical interactions. This type of information can provide a significant competitive advantage, which is why courts are willing to protect it.

Why Departing Employees Create Legal Risk

Employee transitions are a common source of trade secret disputes. When individuals leave a company, they often want to maintain relationships with clients they have worked with directly. However, there is a legal line between permissible competition and improper use of confidential information.

Using memory and general industry knowledge is typically allowed. Taking documents, downloading client data, or using confidential systems to solicit clients is not. The distinction often comes down to how the information was obtained and whether it was protected by the employer.

In this case, the court determined that the advisor crossed that line.

Lessons for Businesses Protecting Client Data

This decision reinforces the importance of treating client information as a protected asset. Businesses that rely on customer relationships should take proactive steps to safeguard that information.

Common measures include:

• Clearly defining what constitutes confidential information
• Implementing confidentiality and non-solicitation agreements
• Restricting access to sensitive client data
• Monitoring data transfers and unusual activity
• Conducting structured offboarding processes when employees leave

Courts are more likely to enforce trade secret protections when a company can demonstrate that it took reasonable steps to maintain confidentiality.

In general, this case highlights the need to balance growth and mobility with strong internal controls. As competition for clients intensifies, disputes over customer data and relationships are likely to become more common.

A Cautionary Tale for Professionals on the Move, Too

For employees, this case serves as a reminder that career transitions carry legal responsibilities. Attempting to shortcut relationship-building by taking client information can lead to costly consequences.

The takeaway is clear. Client lists are not just contacts. In many cases, they are legally protected intellectual property, and both companies and employees must treat them accordingly.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.