Toronto-Dominion Bank Sued Over Non-Compete Agreement

A former credit trader at Toronto-Dominion Bank has initiated legal action against the financial institution, seeking to invalidate a one-year non-compete agreement. The trader, who left the bank in August, alleges that the bank failed to honor its initial commitment to support an algorithmic trading strategy. The lawsuit was filed in the New York Federal Court against the bank's U.S. securities subsidiary.

The trader claims that upon joining Toronto-Dominion Bank in February 2024, the bank had explicitly promised to support a trading strategy based on algorithms, models, and alpha signals. This strategy was to be executed through the bank's sales and trading department. However, the trader asserts that in April 2025, just one week after the strategy's launch, more than half of the employees in the trading department were terminated. The new department head reportedly expressed a preference against executing the strategy, citing his knowledge of market trends and the lack of support from other team members.

The bank has not commented on the lawsuit. The trader's legal representative did not respond to requests for further comment.

The trader alleges that after the bank shut down the strategy in July, it refused to clarify the compensation plan, instead asking the trader to "trust" the management. When the trader expressed a desire to resign, the management initially indicated a wish for him to stay. However, the lawsuit states that the management later rejected the trader's request to form his own team to execute the strategy, giving him the ultimatum to either accept the situation or leave.

Following the trader's resignation on August 25, the bank attempted to enforce the non-compete agreement, allegedly restricting the trader's ability to earn a living in the financial industry. This has reportedly resulted in income loss, delayed compensation, increased medical insurance costs, and damage to the trader's reputation.

The trader further argues that due to the rapid and dynamic nature of the quantitative finance field, each day of unemployment results in a degradation of skills. The trader's lawsuit highlights the complexities and potential pitfalls of non-compete agreements in the financial sector, where rapid technological advancements and market changes can significantly impact an individual's career trajectory. The outcome of this legal battle could set a precedent for how such agreements are enforced and interpreted in the future, potentially influencing the practices of other financial institutions.