Regulation BI Compliance Due by June 30

Compliance with Regulation Best Interest, including the filing of Form CRS is due on June 30, 2020 for all registered broker-dealers and investment advisers.

See Introduction to Regulation Best Interest

Paycheck Protection Program Loan Will Not Cause a U-4 Disclosure When Forgiven

The government's use of PPP loan forgiveness has raised concerns for brokers as to whether the forgiveness of the loan will create a U-4 disclosure. No need to worry.

Form U-4 requires disclosure of bankruptcies and compromises with creditors, among other financial disclosures for all registered persons. Brokers have been wondering if the forgiveness of a PPP loan constitutes a compromise with creditors, which would require disclosure.

This is not as odd a question as it might seem, as FINRA sometimes contrives odd interpretations of its own language. Ask me about FINRA's definition of conversion, which is materially different than the dictionary definition and the legal definition. Or the time I represented a broker when FINRA tried to take the position that his agreement in family court to an alimony payment plan is a compromise with creditors, which he failed to disclose. We prevailed in that instance as well, but FINRA has taken the position that settling a mortgage through a short sale was a compromise with creditors and disclosable,  as well as settling a credit card debt for less than owed. 

However, this time, they are in agreement with common sense. The PPP loans, when forgiven if used in accordance with the government program, are not compromises with creditors.  FINRA agrees, according to Financial Advisor IQ. 

We will update when we have word directly from FINRA

Another Broker Promissory Note Win

As I have written before, broker promissory note cases are difficult to defend. The firms have had decades of experience writing the documents, and honing them to a fine point so that they are not defensible.

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.



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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 mja@sallahlaw.com if you have any questions, comments or concerns regarding such matters.

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• Brokers Can Win Promissory Note Cases 
• Transition Agreements are Negotiable - Even For Credit Suisse Brokers 

Credit Suisse Deal Gets Worse - 13 Year Repayment

This Credit Suisse - Wells Fargo deal is getting worse. Aside from a $5 million bonus cap, we are now learned that the forgiveness on the note is THIRTEEN YEARS!!

I assume everyone knows how these forgiveable loans work. The firm gives you a multiple of your last year's gross commissions as a loan, and they forgive the loan over a period of years. That period has been 7 to 9 years, firms are starting to ask for 11 years, and now Wells Fargo is looking for 13 years.

That is a long time, and something that brokers need to seriously consider before agreeing. We have all witnessed the problems with these long term notes - managers change, staff gets fired, offices close, desks close, divisions consolidate. There are dozens of things that could go wrong and make a broker's life a disaster in a 7 year relationship, never mind thirteen years.

As I said before, these agreements are negotiable, and need to be reviewed by counsel. Brokers cannot be expected to commit to a thirteen year relationship, which for many means spending the rest of their career with Wells Fargo.

That may not be a bad thing, but what happens when Wells Fargo decides to stop paying on accounts with less than $500,000 in assets? Or it decides to merge with Merrill Lynch? Or it shuts down the office that you work in and changes your commute to 2 hours, or...well, I could go on forever. I have represented brokers in all of these types of scenarios, and the longer the note, the more potential for problems.

Going to another firm is a possible solution, but then there is the arbitration that you will need to file to get your deferred compensation to consider. Odds are you will win that case, but it is a hassle.

Need help? Call our office at 212-509-6544. We represent brokers across the country in transitions, and have dealt with every major firm. Or email me - mja@sallahlaw.com

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• Transition Agreements are Negotiable - Even For Credit Suisse Brokers 
• Promissory Notes - EFL Litigation Explained
• Brokers Not Buying the Credit Suisse Wells Fargo Deal 
• More Credit Suisse Defections - Advisors With $1.4B go to J.P. Morgan 
• Merrill Using Robots, Not Brokers 
• Merrill Lowers Broker Compensation 

Broker Independence: Morgan Stanley Advisors Join FiNet

The move to independence continues. Two Morgan Stanley advisors with $152 million in combined client assets have gone independent with the Wells Fargo Advisors Financial Network.

,Ex-Morgan Stanley Advisor Gene Petro has opened an independent practice with FiNet in Mobile, Ala. with roughly $66 million in AUM, according to the firm. Since getting his start in the securities industry with E.F. Hutton in 1980, Petro worked for Shearson Lehman Hutton, Citigroup and the Robinson-Humphrey Company, according to FINRA.

Roberta Hunter, also from Morgan Stanley, brought over $86 million in AUM to her newly opened independent FiNet practice in Santa Cruz, Calif., the firm says. Hunter also has previous experience with Citigroup, BrokerCheck records show.

Morgan Stanley Advisors With $152M in AUM Join FiNet

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The attorneys at Sallah Astarita & Cox represent brokers and advisors in transitions between firms, and in the creation of their own RIAs and broker-dealers. Call today for a free consultation - 212-609-6544

Credit Suiss Advisors Free to Move to Wells Fargo

Wells Fargo struck a deal with Credit Suisse to smooth the recruitment of the Swiss lender's private-bank employees as their firm retreats from managing wealth for U.S. clients.

The deal would allow U.S. advisors and clients to move to Wells Fargo Advisors by early 2016, according to a joint statement Tuesday from the firms.

Wells Fargo Reaches Agreement to Add Credit Suisse Advisors

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Considering a move? All deals are negotiable. At all firms. Don't fall for the hype, you can get a better deal, and resolve your disputes with your prior firm. Call us today - 212-509-6544 - Sallah Astarita & Cox, a national securities law firm.

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Small Percentage of Brokers Fined is a Bad Thing?

It is truly a bizarre world that we live in. Anyone involved in the financial services industry knows that  the overwhelming majority, in fact almost all of the registered representatives in this country, are honest, hard working professionals.

Everyone also knows that not all  of the 630,000 individuals holding a Series 7 license actually deal with retail investors - or investors in general. In FINRA's grab for regulatory turf there are a host of brokerage firm employees  who are required to have the license who do not deal with investors, or trading, at all.

Then why, in a year where FINRA enforcement proceedings are up, and fines are up, are critics complaining that the increase in fines and proceedings are not enough, since "[o]nly a small fraction of the 629, 980 registered securities representatives that FINRA oversees—not to mention the almost 4,300 brokerage firms under the regulator’s supervision—were served with enforcement actions."

How about the fact that financial professionals are honest and hard working. Why isn't it a good thing that less than 1% of all Series 7 licensees have been the subject of a FINRA enforcement action in a year? FINRA certainly isn't slacking off on its enforcement proceedings, and it has become a huge fan of conducting overlapping annual exams at smaller firms.

Do we really want to encourage regulators to 'bring their number up"? To simply bring charges against brokers and firms simply to make the numbers look "better" or to increase their revenue?

That is not the purpose of our regulatory structure, nor should it be the goal of enforcement proceedings.


.A "Tougher" FINRA? | Industry content from WealthManagement.com

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Spike in FINRA, SEC Regulation Leaves Star Brokers Exposed

We represent big producers and teams across the country, and have done so for years. While this article presents an unfair characterization of big producers, it makes a good point. FINRA and the SEC are cracking down and firms are looking to maximize profits (which sometimes means getting rid of brokers). None of that is good for brokers, and the  top teams are not immune from the problems.

Brokers need to protect themselves; unfortunately from their own firms as well as overzealous regulators.

Spike in FINRA, SEC regulation leaves star brokers exposed

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Mark Astarita represents financial advisers across the country in their regulatory, transition and employment matters. Got a question? Give him a call at 212-509-6544.

Can Stifel Retain the Barclay Advisors?

According to Financial Planning, Stifel's proposed acquisition of Barclays's wealth management unit offers the chance to serve more lucrative high-night-worth clients. But keeping the advisers who serve those clients may prove tricky.

The Barclays deal, for which terms were not disclosed, brings about 180 advisers managing $56 billion in assets. Many of those advisers are legacy Lehman Brothers brokers, and they currently operate from 11 U.S. offices.

For more information, see Is Stifel's Retention Package Enough to Keep Elite Barclay's Advisors?

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The attorneys at Sallah Astarita & Cox include veteran securities litigators and former SEC Enforcement Attorneys. We have decades of experience in securities litigation matters, including the defense of enforcement actions. We represent investors, financial professionals and investment firms, nationwide. For more information call 212-509-6544 or send an email to mja@sallahlaw.com.

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• Reviewing Broker Transition Agreements 

Broker Dealers Move to Banking Fueling Transitions?

We are seeing an increase in broker transitions between wirehouses, and it  is not only the larger producers who are making these moves.

While large teams may have an easier transition, and have more leverage in the contract negotiations, we have found that firms are more willing to negotiate terms with lateral hires, depending on the team and the details, and depending on the region, there seems to be an increased desire to recruit new teams.

Some in the industry believe that the moves are a function of the wirehouses growing their lending capabilities in an effort to bring in more assets and deepen client relationships – particularly with wealthy and ultra-wealthy clients.

Just today Merrill announced that it has hired a UBS team with more than $3 million in revenues. The team said that one of their reasons for moving was lending capabilities at Merrill.

For more information - Merrill Grabs $3M UBS Team


Related Articles:

• Merrill Lynch's Robo Push 
• Merrill Recruits Nearly $3 Billion Broker Team
• Broking veteran Craig Mason to run BBY 

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The attorneys at Sallah Astarita & Cox  have decades of experience in representing brokers, and firms, in broker transition issues, and have represented brokers moving to and from every major firm, nationwide. For more information call 212-509-6544 or send an email.

The Advantages of a Regional Brokerage Firm

In my securities law practice I have represented large national firms, regional firms, and small local firms and hundreds of brokers from all size firms. Each business model has its own advantages and disadvantages for the adviser, and the investor. As the large firms have consolidated over the years, investors, and brokers, are finding additional advantages in the regional and small firms, at this article from Forbes points out.

Regional firms, and independent firms, offer some significant advantages to both the adviser and the client. Advisers enjoy the more entrepreneurial culture and the regional firms, and investors enjoy more individualized attention from their adviser, and the firm itself.

As discussed in the article, the advantages for advisers include increased access to the decision makers at the firm, plus,  they will be more important to these people than if they were large producers at a wirehouse. That is an advantage for their clients as well. In addition, regional brokerages generally have fewer proprietary products than their larger counterparts do. Therefore, advisors are under less pressure to offer in-house products to clients, who often perceive a conflict of interest in such sales. As stated by Forbes, "this independence appeals to advisors attracted to the objectivity and fiduciary status associated with RIAs. Additionally, regional brokerages are not associated with banks, which reduces the pressure to cross-sell bank products."

We represent advisers who transition from large firms to regional firms, and with the right mind-set, and the right account mix, those advisers are apparently more successful in their new positions - and their clients get more attention and better service.

For more information, go to The Comeback Of The Regional Broker/Dealers and if you are considering a move, then visit our securities employment section at our site, or send me an email and see how we can help you make that transition.

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The attorneys at Sallah Astarita & Cox include veteran securities attorneys who are well versed in the unique issues facing brokers and advisers who are changing firms and provide representation to brokers across the country. For more information call 212-509-6544 or send an email.

Reviewing Broker Transition Agreements

With rising markets, and increase trailing twelves, more and more advisers are changing firms in the hopes of a better environment for themselves and their clients. Unfortunately, far too many advisers believe that their agreements with their new firm are non-negotiable, and do not retain an attorney to review the agreements.

Fortunately, this is not true, and virtually every agreement has room for negogiation, regardless of the broker's production level. Obviously there is more that can be done for larger teams, but every transition package should be reviewed by an attorney.

We provide such reviews and negotiations for brokers with every major wirehouse, and small and mid-sized firms across the country. We provide those services on a flat fee basis, and work with our client's former firm, and new firm, to provide a smooth transition for the broker, and the clients.

Brokers and advisers are changing firms on a near daily basis. Just today there are reports that BNY Mellon is building out its wealth management team in Chicago, Seattle and Palm Beach Gardens, Fla. According to Financial Planning magazine, the firm hired three directors in Chicago, three advisers in Seattle, and added advisers in  Palm Beach Gardens,

For more information - BNY Mellon Expands Wealth Management Team in Key Markets | Financial Planning

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The attorneys at Sallah Astarita & Cox include veteran securities attorneys. We represent firms and advisers of all sizes, across the country, in compliance, regulatory and litigation matters. For more information contact Mark Astarita at 212-509-6544 or at email us

Challenges in Transitioning Away From Your BD

My securities law practice involves most every aspect of the brokerage industry, and at various times I represent a significant number of brokers who are leaving their broker-dealers, for what they hope are greener pastures. Over the years I have assisted brokers in all sorts of transitions - firm to firm, firm to independent firm, firm to investment adviser firms - even starting their own investment advisory firm.

While every situation is somewhat unique, brokers face the same challenges in the transition process - some of those challenges are legal, some are business oriented. While I believe I have faced and dealt with every challenge over the years, I thought my readers and clients might find this article, by a Phillip Flakes, who assists brokers in finding, and partnering with new financial firms, helpful in identifying those issues.

If you are considering a move, take a few minutes to review this article, which presents the business side of the issues. Then, while I am better known for the litigation side of the transition process, in particular the defense of promissory note cases, if you decide to make a change, give me a call to seek how I can assist you in that transition. Ligitation is not always the answer - careful planning can often avoid litigation.

I am available by phone at 212-509-6544 or by email - mja@sallahlaw.com

Identifying and Overcoming the Challenges of Transitioning.

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