‘Built and destroyed’: Wall Street reels from ban on non-compete pacts

| The US Federal Trade Commission’s action to ban non-compete agreements has left Wall Street businesses rushing to restructure contracts and find new ways to tie down the high-priced personnel that their business models rely on.for a certain period of time after leaving their current employer, have long been a hallmark at big banks, brokers, asset managers and hedge funds.

But lawyers and financial businesses say they cannot afford to wait for the outcome of that lawsuit. They are combing through the rule’s more than 500 pages and seeking workarounds that will allow Wall Street to continue to protect its intellectual property and trade secrets. While the FTC rule includes an exception for “senior executives”, that carve-out is only retroactive. The regulator defines this slice of the workforce as those making more than $US151,164 a year who are also in “policymaking positions”. New non-compete agreements, for any level of employee, are prohibited.

Industry association Sifma argued in a public comment before the rule was adopted that the FTC did not have the power to regulate banks and credit unions. In theory, that could give traditional banks more flexibility on non-competes than asset managers, private equity firms and hedge funds.However, industry lawyers believe that banking regulators have the option of enforcing the FTC’s rules on the banks, should they choose to do so.

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