How the noncompete ban will hit financial services. Plus: The Fed’s next move, Klarna’s IPO ambitions, and more

How the noncompete ban will hit financial services. Plus: The Fed’s next move, Klarna’s IPO ambitions, and more

May 20, 2024, LinkedIn: The Finance Files

Evan Parness and Jenna Wallace’s commentary was included in an article from LinkedIn’s The Finance Files, examining the Federal Trade Commission’s (FTC) rule banning noncompete agreements. Evan and Jenna comment on the new rule’s effects on the financial services industry.

Evan states that “should the FTC rule banning noncompetes in employment agreements survive litigation challenges, it would have a significant impact on the financial services industry. For decades, employers in the financial services industry have relied upon reasonably tailored non-competition provisions to protect their trade secrets, confidential information, goodwill with customers and employees, and investment of time and money in training employees.”

Jenna adds that the FTC's jurisdiction, and thus the potential reach of the noncompete ban, is limited. For example, within the financial services industry, the FTC does not have jurisdiction over banks, which are overseen by federal and state bank regulators. The FTC's position is that its jurisdiction does extend to bank holding companies and to other non-bank entities that are affiliated with a bank, she says.