Charles Schwab is taking one of its former representatives to court, accusing him of being a “disloyal employee” who allegedly got away with using trade secrets on thousands of Schwab customers.
Schwab filed a motion in Texas federal court this week for a preliminary injunction against former Schwab employee Roberto Ortega. They are asking the court to stop him from allegedly soliciting Schwab's clients or using client information from his former employer while the parties wait for the FINRA arbitration to begin.
According to SEC dataOrtega joined Schwab in 2022 after previous stints at Fidelity and JP Morgan. When he left Schwab, Ortega was a vice president and financial consultant, overseeing clients with about $1.5 billion in collective assets, most of which were located near the Schwab bank branch in The Woodlands, Texas.
According to Schwab, Ortega did not develop these clients through his connections, but rather they were given to him by the firm. The representative allegedly helped clients make a personal financial plan and collaborate with other Schwab employees on needs, including wealth planning, education and retirement.
Schwab argued that they had provided Ortega with “extensive” access to customer data to do his job and that there was no public source for Ortega to access the identifications and contact information of Schwab's customers.
As part of his employment agreement, Schwab alleged that Ortega signed a contract specifying that he would give four weeks' notice before leaving the firm, would not receive confidential client information and would not solicit Schwab clients for 18 months. after leaving.
According to the lawsuit, Schwab can track when its agents access the Client Central database, which includes customer information. The firm alleged that Ortega accessed the database at 11:05 a.m. on May 6 and “methodically accessed” 1,008 client summary screens by 11:48 p.m. that night. Over a day and a half, the representative accessed the database 1,689 times, and he continued to access the data at later dates, according to Schwab.
According to the lawsuit, in the “normal and historical course of business,” Ortega would tend to access the database 10 times a day. Schwab also alleged that Ortega was repeatedly accessing customer “summary” screens, which contained basic customer information, including names and contact information.
“From a timing perspective, Ortega's access was inconsistent with any legitimate business purpose—Ortega had no need to access Client Central in such large numbers and at such late hours,” the complaint said. “Additionally, as he worked through the Customer Summary screens, he did so quickly, reviewing one after the other and viewing multiple Customer Summary screens in less than a minute.”
Instead, Schwab speculated that Ortega was copying or photographing the records. In the complaint, the firm alleged that another employee saw Ortega holding his phone up to his computer screen several times, assuming he was taking pictures of client information.
On July 1, Ortega resigned without notice and began working for Arlington, Va.-based Nhabla. According to its most recent Form ADV, the firm is an RIA with approximately $108,660 in assets under management. Its principal owners were Ortega and Johnny Medina (who also acted as the firm's chief compliance officer). Ortega could not be reached for comment ahead of publication.
According to Schwab, Ortega had contacted numerous clients, persuading them to move their business away from Schwab. Additionally, the firm alleged that Ortega had access to client databases for 2,295 clients, although he only worked with about 365 of them; Schwab alleged that Ortega also wanted to obtain information about clients he did not serve as part of his job.
“Schwab considers the protection of client information and confidentiality to be of the utmost importance and expects its representatives to comply with their contractual and legal obligations,” a firm spokesperson said of the lawsuit. “We intend to enforce our rights and hold Mr. Ortega accountable for breaching his obligations and obtaining Schwab's confidential information.”
As part of the lawsuit, Schwab asked Ortega to return any client information he allegedly received and to stop soliciting Schwab clients, as the firm accused him of doing. The firm asked that the court order all parties to “proceed to an expedited arbitration” in the FINRA proceedings.