Roberto Ortega, a former registered representative, allegedly resigned from Schwab without prior notice and took confidential client information, which he used for solicitation, Schwab's complaint asserts.
Charles Schwab has filed a complaint against a former registered representative accused of taking confidential information and trade secrets about Schwab's clients and using that information to solicit their business after leaving Schwab.
While working as a registered representative at Schwab's branch in The Woodlands, Texas, Roberto Ortega was provided confidential information pertaining to high-net-worth clients with more than $1.5 billion in assets in Schwab accounts, according to the complaint, filed Tuesday in the U.S. District Court for the Southern District of Texas.
The confidential information included contact information, transactional histories, account types, account balances, asset allocations, income, liquid and total net worth, tax status, tax information, and investment objectives, among other details, according to the complaint.
Ortega resigned from Schwab without notice on July 1, according to the complaint. A subsequent review of his computer activities in the weeks preceding his departure as well as eyewitness testimony "strongly suggest that Ortega intentionally and maliciously misappropriated confidential and trade secret client information," Schwab asserts in the complaint.
Ortega "without any apparent legitimate business reason" rapidly reviewed 1,689 client-overview screens in a proprietary Schwab database on May 6 and 7, accessing 1,031 of those screens between 6 p.m. on May 6 and 3:32 a.m. on May 7, according to the complaint. He repeated this process on May 14, 15, 16 and 22, according to the complaint. During the normal and historical course of his tenure at Schwab, Ortega typically accessed the client database about 10 times a day, Schwab said.
Schwab says that clients have since reported that Ortega has used, and is using, the misappropriated information to solicit them. Ortega did not develop his Schwab clients through cold calls or his own connections but instead built his book from leads and clients provided by Schwab, the complaint asserts.
Schwab requires its client-facing registered representatives to sign a confidentiality and non-solicitation agreement, which Ortega executed on Jan. 19, 2022, according to the complaint. That agreement included promises to provide four weeks' notice of resignation; to refrain from taking, using or disclosing confidential client information; and to refrain from soliciting or inducing clients to move their business from Schwab, per the complaint. Ortega violated all three of these promises, Schwab says.
Schwab is alleging breach of contract and misappropriation and misuse of trade secrets, and it is seeking a preliminary injunction and a court order directing Ortega to return any confidential information from Schwab files and data, to refrain from using that information and data, and to refrain from soliciting or contacting his former Schwab clients, pending resolution of a companion claim filed in the Financial Industry Regulatory Authority's dispute-resolution system.
Ortega entered the industry in 2014, when he registered with J.P. Morgan, and he has also been registered with Strategic Advisers, Fidelity Investments and Schwab, according to his record in the Securities and Exchange Commission's Investment Adviser Public Disclosure database.
Ortega is one of two principal owners of NHABLA, an Arlington, Virginia-based registered investment advisor firm, where he has been registered since October, according to the IAPD. The state-registered firm was founded in 2021 and managed just over $100,000 as of the end of 2023, according to its Form ADV Part 2 brochure.
"Schwab considers the protection of client information and confidentiality to be of utmost importance and expects that its representatives will comply with their contractual and legal obligations. We intend to enforce our rights and hold Mr. Ortega accountable for violating his obligations and taking Schwab's confidential information," a Schwab spokesperson said in a statement to FAIQ.
]NHABLA did not respond to a request for comment from Ortega by this publication's deadline.
Ortega had not been served with the suit as of Tuesday, court records show.