But the conduct of firm employees leading up to the signing of the note and the transition to the firm are not always up to snuff. Far too often we see cases where promises are made to entice a broker to leave a firm and join the new firm, only to find that the firm cannot live up to those promises.
The problem with some of those claims is that the promises are often difficult to prove. We had great success in a case against Merrill Lynch years ago, where an arbitration panel refused to enforce a $750,000 balance owed on a note, because the firm simply refused to allow the broker to conduct the business that she was hired to conduct.
In a recent FINRA arbitration, a panel refused to enforce a promissory note against a Morgan Stanley broker. The broker's defense and counterclaim involved claims of breach of implied covenant of good faith and fair dealing, fraud and misrepresentation, and negligent misrepresentation. The broker claimed that the firm made several false representations to him in order to tempt him to leave his then-current employer and work for Morgan Stanley. He alleged that had the firm not made these representations, he would not have left his previous employer, nor executed a promissory note with the firm.
The defense and counterclaim were a success. The panel denied any relief to Morgan Stanley, and awarded the broker $300,000 on his counterclaim, plus interest. It also ordered Morgan Stanley to pay the costs and fees associated with the arbitration.
While it doesn't happen often, with the right evidence and the right facts, brokers can win promissory cases. The arbitration award is available at SECLaw.com- link.
Mark Astarita is a New York securities lawyer who represents investors and financial professionals across the country in securities arbitrations and investigations, and has been doing so for over 25 years. Call him at 212-509-6544 or email him at firstname.lastname@example.org if you have any questions, comments or concerns regarding such matters.