May 30, 2017
If your firm is not part of the Broker Protocol, you may be subject to either a non-competition agreement (which prohibits you from acting as a registered representative for anyone else) or a non-solicitation agreement (which prohibits you from soliciting your clients) if you leave your firm. If you are considering leaving your firm, have your attorney review your agreements to determine if you are subject to any such agreements and whether they are enforceable. If you are just joining a firm, have your attorney review these provisions before you sign. This provision is often negotiable with your broker-dealer. Enforcement of non-competition/non-solicitation agreements are dependent on the particular facts of each case.
Unlike other states, Colorado has a statute which explicitly prohibits non-competition agreements except in certain circumstances. Colo. Rev. Stat. § 8-2-113. Non-solicitation agreements have been found to be the same as non-competition agreements and will also be judged by this statute. Phoenix Capital, Inc. v. Dowell, 176 P.3d 835 (Colo. App. 2007). One of the circumstances in which such agreements will be enforced is if they are intended to protect trade secrets. Broker-dealers treat their customer information as trade secrets, and seek to enforce non-solicitation clauses under this exception. Whether or not customer information is a trade secret is dependent upon the facts of each case. Did you bring your clients to the firm? Did the firm pay fees to provide you with leads? Did you purchase your own leads and develop your clients by yourself? It is best to have these issues decided before you sign a non-solicitation agreement, in order to prevent litigation when you leave.