Question: My brokerage firm terminated me recently. I had a contract with them that said if I was terminated for any reason, all clients belonged to them, but theyd pay me for my book of business based on the value as of the end of the most recent quarter. Since the end of the first quarter and now, however, I added a few big clients so I think my book is worth more than what theyre offering. The firm has said theyd pay me the additional money but, in exchange, they want me to sign a noncompete. Can they force me to do so?
No one is actually forcing you to do anything. The contract you originally signed provided a method for calculating the value of your book, and the method chosen was agreed to by you. You could have just as easily lost several big clients between the end of the last quarter and now, which would have given you an advantage over your former employer. Consequently, at the time the contract was originally signed, each of you took a risk and therefore gave up something. In contract law, this is called consideration. You are now asking them to pay you money that they are not legally obligated to pay. In essence, youre asking them to modify the existing agreement (or enter into a new agreement). Nothing requires them to do so. They are, however, willing to do so in exchange for some consideration on your part, i.e., entering into a non-compete with them.
You need to decide what is worth more to you. If you plan to stay in the business and compete in the same area as your former employer, it may not be worth it to sign the non-compete. However, if the amount theyre offering you is enough to last during the non-compete period or if you can work outside the geographic area of the non-compete, it might be more advantageous to sign the agreement and take the money. As with any other contract, youre free to negotiate, accept the terms or walk away.
Question: We have a client who is suffering from Alzheimers. One of her children has begun the process to have her declared incompetent but does not yet have a power of attorney for the account. Another child is fighting with the first sibling over control of the account, and between the two of them they keep getting their mother to issue conflicting instructions. The account is non-discretionary and we cant take action without instructions. Until such time as we get an order from the court appointing someone as the guardian, what should we do?
I first wrote about issues involving the elderly and diminished capacity in December 2011. However, in recent months Ive had this question come up in one form or another, and I think its time to revisit the issue. At this stage, youre in a difficult situation. You cant take instructions from either child, and you know the mother is in a vulnerable position and most likely cant make decisions for herself. As you noted, without a court order appointing a guardian, the only one authorized to make decisions on the account is the client herself. Assuming that you cant convince her not to do something foolish or which contradicts her prior instructions when youre speaking with her, the next step is that you need to speak with your attorney. Depending on your states laws, there may be specific actions you can (or cant) take. For example, you may need to contact the court where the competency petition was filed to see if a temporary guardian could be appointed, or you may need to contact the local authorities in her jurisdiction to obtain assistance. Before getting to this point, however, firms should review the SECs report Protecting Senior Investors, found at http://www.sec.gov/spotlight/seniors/seniorspracticesreport092208.pdf.
Alan J. Foxman is an attorney with the law offices of Rita G. Drew and a senior consultant with National Compliance Services in Delray Beach, Fla.
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