Articles Posted in Compensation Disputes

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Herskovits PLLC is investigating whether Morgan Stanley unlawfully “forfeited” deferred compensation otherwise due and payable to financial advisers formerly employed by the firm.  A class action lawsuit involving similar claims has begun in the U.S. District Court for the Southern District of New York.   That litigation is in its early stages and may carry on for years before a resolution is reached.

Morgan Stanley’s Deferred Compensation Plan

Morgan Stanley compensates FAs based on revenues generated from the FA’s customers’ accounts.  Morgan Stanley typically defers a portion of the fees generated as “deferred compensation” and allocates a substantial percentage of the FA’s deferred compensation to the Morgan Stanley Compensation Incentive Program.  75% of the deferred compensation vests over a six-year period and 25% vests over a four-year period.  However, Morgan Stanley “cancels” the deferred compensation if the FA leaves Morgan Stanley prior to the vesting dates.

In September of 2018, Merrill Lynch terminated the Claimant in this arbitration for allegedly opening up a Bank of America bank account for a customer without authorization.  In 2020, the Claimant brought an arbitration against Merrill Lynch seeking expungement of the alleged defamatory reason for termination  and also sought $50,000 in compensatory damages.  The FINRA arbitration award is viewable here.

The arbitration was conducted under FINRA’s simplified rules before a single public arbitrator and the Claimant represented herself without an attorney.  Merrill Lynch was represented by the law firm Seyfarth Shaw LLP.

In her findings, the single arbitrator seemed particularly concerned that Merrill Lynch failed to even speak with the customer about the allegations in dispute.  Merrill Lynch also failed to have the customer sign an affidavit supporting the allegations.  The client in question was known to be suffering from memory problems so significant that Merrill Lynch terminated her as a brokerage client despite an account balance in excess of $500,000.  The client had previously complained about unauthorized trading in her account by her primary advisor.

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