Recently, a Texas appellate court upheld a common law prohibition against a former registered rep who had moved firms.

The court indicated that this departing broker had a common law obligation to maintain confidential information from his prior employer.  See Institutional Securities Corporation, et al. v. Vernon J. Hood, III (December 12, 2012),  In this case, the broker had downloaded information and also obtained other documents in preparation for sending information to his customers.  The court found that he was not permitted to do such a thing and could not use a broker/client data.  This was interesting because the broker had actually been fired and escorted out of the building.  The broker had previously downloaded this information.

Although the broker did not have a restrictive covenant or non-compete, the court imposed one upon him and indicated that the broker could face disciplinary action from FINRA.  This decision is problematic for those brokers moving from firm to firm.