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Wealth Management Talent Tussles - Getting Legal Balance Right
8 October 2019
The private banking spying drama has shone a spotlight on the sometimes fierce battle for talent and the legal balancing act this brings up. Trouble in Zurich
All the talk of how humans might be cut out of the picture by robots has had a reality check. All-too-human senior figures are as sought-after as ever. The Swiss wealth industry has been rocked by the story of Iqbal Khan, now installed at Credit Suisse’s arch-rival, UBS. Revelations that Credit Suisse chief operating officer Pierre-Olivier Bouée had authorised surveillance on Khan to see if he tried to solicit old colleagues to move over, ended in a damaging scandal. Boueé has resigned from his job. Media reports at the weekend said prosecutors in Zurich are investigating Credit Suisse over the matter.
The saga suggests that banks have a difficult job in trying to balance the need to prevent former colleagues taking other co-workers away against the reputational damage of being seen to be play too roughly. That’s the view of Catriona Watt, partner at London-based law firm Fox & Partners. This firm focuses on areas such as employment law in financial services.
“At a very senior level onerous restrictions are being enforced in courts and we are now seeing financial services firms more readily holding senior individuals to their terms,” Watt told this news service.
“In our experience, there are varying forms of action firms might decide to take where it suspects wrongdoing or potential damage to the business by a current or former employee, some technical and some more traditional, such as employee threat or email traffic monitoring software, use of CCTV, to even engaging a private investigator,” Watt said.
“We have seen cases where firms do engage private investigators to follow departed/departing employees where they suspect an unlawful team move, breach of confidentiality, misuse of confidential information or unlawful solicitation of staff or clients in breach of restrictive covenants or fiduciary duties,” she continued.
If a firm decides surveillance is justified – such as legitimate worries about a serious loss or other harmful activity – it should only be initiated at a senior management level, with strict guidelines in place, she said.
In the media accounts of the Khan case, Khan was followed by detectives trying to prove whether he had attempted to poach ex-Credit Suisse colleagues to join him. Unidentified men followed Khan while he was driving his car with his wife. He eventually noticed that he was being followed and took pictures of his pursuers, which led to a physical confrontation in broad daylight in downtown Zurich when the men tried to take away his mobile phone. A private investigator who reportedly organised the surveillance on Khan committed suicide last week, a lawyer for the security firm at the centre of the spying case is quoted by media (Reuters, other) said.
Credit Suisse last week said that while the firm should take appropriate measures to safeguard its interests, the decision to put Khan under observation was “wrong and disproportionate and has resulted in severe reputational damage to the bank”.
In the UK, there have been lawsuits involving cases where advisors have defected to a new firm, raising questions about the costs/benefits of taking the legal route. However, there have not, in this publication’s recollection, been cases of detectives following people who are off to a new firm.
A number of cases have focused on advisors’ ability or not to take old clients with them to new firms. A decade ago, Tullett Prebon, the UK brokerage house, won a court case against BGC Partners after claiming that its arch-rival illegally poached key staff via a series of text messages. In 2012 the UK High Court in London dismissed the claim by Towry (which at the time was an independent firm) that the seven advisors - who left after Towry bought Edward Jones in 2009 - had broken their contracts by contacting their former clients. (The advisors had moved to Raymond James.)
Surveillance may not – depending on jurisdictions – be necessarily wrong in all cases, but some restrictions apply, Fox & Partners' Watt said.
Commenting on the UK legal angles, she said: “The ability to conduct, particularly covert, surveillance is constrained by the firm’s own internal policies and procedures at one end of the spectrum and the data protection legislation (in relation to processing of personal data), privacy laws and the Human Rights Act (the right to a private and family life and correspondence) as well as civil harassment laws (Protection from Harassment Act 1997, which was originally enacted to provide a remedy against stalkers) at the other end.”
“If the individual is still employed then unjustified undercover surveillance could result in a constructive dismissal claim or claim under the discrimination or whistleblowing legislation,” she added.
Whatever happens further in the Credit Suisse/Khan affair, it is unlikely that the talent battles will become less intense at certain levels of this industry.
The private banking spying drama has shone a spotlight on the sometimes fierce battle for talent and the legal balancing act this brings up.
Trouble in Zurich