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Morgan Stanley Exits Broker Protocol

Morgan Stanley which saw its total advisor headcount drop slightly in the third quarter, says it will leave the Protocol for Broker Recruiting as part of its drive to make new investments in its advisors.

The protocol, created in 2004, limits litigation among member firms that sign on and agree to a set of rules regarding their advisors leaving and joining another company. In a statement released Monday, Morgan Stanley claimed the protocol had become “replete with opportunities for gamesmanship and loopholes” that undermined the rules. By exiting the agreement, the brokerage said it will be able to invest more in its advisors and drive growth.

But Morgan Stanley’s withdrawal from the agreement could mark a period of uncertainty for an industry already undergoing significant changes.

In addition to Morgan Stanley brokers, there will likely be broad implications for the industry if other Wall Street firms decide to exit as well.

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