Proposal to Prohibit Non-Compete Clauses May Impact Mergers and Acquisitions of RIAs

Posted on January 18th, 2023 at 3:06 PM
Proposal to Prohibit Non-Compete Clauses May Impact Mergers and Acquisitions of RIAs

From the Desk of Jim Eccleston at Eccleston Law.

A federal prohibition on noncompete clauses may impact future mergers and acquisitions of investment advisory firms as well as how financial advisors transfer to new firms.

The Federal Trade Commission (FTC) recently released a rule proposal that would ban the use of non-compete clauses, which typically restrict employees from moving to rival firms. These clauses are an “often exploitative practice” that serves to lower wages and restrict innovation, according to the FTC. The proposal overview indicates that nearly one in five U.S. workers, or about 30 million people, are subject to non-compete clauses. Nevertheless, the new rule may impact M&A involving registered investment advisory firms (RIAs) moving forward, according to InvestmentNews.

The new rule would allow non-competes for a person who owns 25% or more of an acquired firm, while those who own less might be free to leave. The concern is that, under such a rule, private equity firms and other entities may be dissuaded from purchasing RIAs if they expect that a substantial number of advisors will depart.

Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, regulatory and disciplinary matters.

Tags: eccleston, eccleston law, advisors, law, sec, ftc, ria

Return to Archive

TESTIMONIALS

Previous
Next

Jim, Stephany and the whole team were a God send.  We felt like we were put into a situation where we had no advocate. Jim’s team came in with a strong, well laid out strategy on how to get our story heard. Where our outside compliance company had no ability to help, our Broker Dealer was impenitent, and the regulators were aggressive pursuing vague rules, Jim came like a barricade against an assault we did not understand. Though you pay member dues to be affiliated with FINRA and a B/D, you have no voice. The only thing that is truly heard in this un-level playing field is a bulldog’s bark like Jim’s. I would encourage anyone to call Jim and his team to find a real ally in the tough and complicated world of securities regulation. They are truly the best.

Greg P.

LATEST NEWS AND ARTICLES

May 8, 2025
All 50 States Now Aligned on Annuity Sales Standards

The annuity industry officially has secured uniformity in sales regulations across all 50 states.

May 7, 2025
Jury Finds Investment Advisor Liable for Failing to Disclose Annuity Commissions

A federal jury in Massachusetts has found investment adviser Jeffrey Cutter and his firm, Cutter Financial Group, liable for violating federal securities law by failing to disclose significant upfront commissions and conflicts of interest related to an annuity replacement scheme.

May 6, 2025
SEC Charges Three Individuals in $284 Million Arizona Sports Complex Bond Fraud by Legacy Cares

The Securities and Exchange Commission has filed a civil enforcement action against Randall “Randy” Miller, Chad Miller, and Jeffrey De Laveaga for allegedly defrauding investors in two municipal bond offerings that raised $284 million.