Non-Compete, Non-Solicit, and Confidential Information Agreements in the Securities Industry, PART TWO


The key distinction between a non-competition provision and a non-solicitation provision is that a “non-solicit” attaches to specific customers or individuals. While there is also a time period during which the non-solicit is in effect, such a provision does not restrict an investment professional from continuing to engage in the same or similar business as his former employer. It simply keeps the representative from soliciting individuals in which the former firm claims a protectable interest.


Non-solicitation clauses are perhaps the most commonly contested provisions in an investment professional’s employment contract. Although the language in these clauses can vary, the intended effect of such a provision is to prohibit a departing representative from “soliciting” clients that he or she served while the representative was with the former firm. To be enforceable, there must be a specified time period during which the prohibition on solicitation will be in effect. These time periods are generally from six months to two years. The longer the time period, the less likely it will be that a court would uphold the provision.


In addition to non-solicitation clauses related to clients, many firms will also include a prohibition on the solicitation of firm employees by a departing representative. These are called “anti-raiding” provisions because they seek to prevent a former employee (or his new firm) from “raiding” the former firm’s other representatives or employees and recruiting them to join the new firm. Courts often recognize that a firm has an interest in protecting its ability to do future business by not having one departing employee effectively transfer over a significant portion of the firm’s employment roster to a competitor.

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