Morgan Stanley Brokers Opt Out of Deferred Comp Class Action

As the proposed class action complaint against Morgan Stanley for its deferred compensation program winds its way through the Courts, former Morgan Stanley brokers are asking if they are better served by filing their own claims in arbitration.

In many cases, the answer is yes. 

Delays in Court Cases

The proposed class action was filed in New York in December 2021. As of today, March 30, the defendants have still not filed an answer, after three months. 

The Morgan Stanley defendants instead filed a motion to compel arbitration, arguing that the claims need to be heard in a FINRA arbitration. While the parties wait for the judge to decide the motion, the case is stayed. Nothing is happening.

If the case had been filed as an arbitration, by now arbitrators would have been appointed, and a hearing date set, probably for December 2022.

Court vs. Arbitration

While there are numerous reasons to file this case as a class action, there are always issues with class actions, and issues with bringing cases in court. Most of those issues are time and money.

I have represented parties in sophisticated federal court litigation, and in hundreds of FINRA arbitrations. There is no doubt that court is better for some cases, particularly where extensive discovery is needed from the other side. Arbitration just isn't the forum if you need lots of documents or testimony from the other side.

However, the Deferred Compensation cases are based on documents we already have - our client's compensation reports, and the plans themselves.

Arbitration is at least as fair as court, and certainly more expeditious. Brokers realize that and we are receiving calls from former Morgan Stanley brokers whose deferred compensation was withheld when they resigned from Morgan Stanley.

More Information

We are interested in speaking to other former Morgan Stanley brokers, as well as former Wells Fargo brokers regarding their experience with the deferred compensation programs.

Call our firm at 212-509-6544 or email us at mja@sallahlaw.com.We represent advisors in all 50 states.

Broker Bests UBS on Deferred Comp

A former UBS broker instituted arbitration proceedings against UBS for failing to pay deferred compensation and bonus compensation, defamation, tortious interference with prospective economic advantage, wrongful termination, and violation of Connecticut Unfair Trade Practices Act.

The hearings took 17 days, over 10 months (who says arbitration is fast?) and UBS was ordered to pay the broker $1,369,949.00 for the deferred compensation claim and $69,231.00 for the unpaid compensation claim, plus interest at the rate of 9% per annum from July 9, 2013 until the award is paid in full - that is almost $400,000 in interest, assuming UBS does not move to vacate the award any pays right away.

But wait! There's more! UBS was also ordered to pay Claimant attorneys' fees in the amount of $868,264.00, and UBS was ordered to amend the broker's U5 to remove the defamatory statements that UBS placed on the U5.

All in all a good day for the broker, and perhaps a lesson to firms not to screw around with deferred compensation. After all, it is the broker's money, that he earned, and the firm has no moral right to manipulate a termination and to keep those funds.

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Sallah Astarita & Cox is a multi-state law firm with offices in New York, Florida and New Jersey. Because of the unique nature of the practice of securities law, the firm represents clients across the country, in virtually every state in the United States. Contact the firm at 212-509-6544.

Credit Suisse Brokers Losing Deferred Compensation

Wells Fargo Advisors (Photo credit: Wikipedia)

Deferred compensation – that form of pay that the firm gives to you, but makes you work for another 3 years to actually receive it.

Everyone in the brokerage industry is familiar with deferred compensation. It was originally designed to help employees lower their tax burden by spreading holding compensation until later years, with presumably lower tax rates. However, the brokerage industry figured out that they could add a vesting period to that compensation, so that while you worked and earned the money, the compensation was deferred, and you had to wait until it “vested” – a period of years.

Credit Suisse is now playing a game with their employee’s compensation. As part of the deal with Wells Fargo, if a broker does not go to Wells Fargo, Credit Suisse will consider her to have voluntarily resigned, and therefore forfeit her deferred compensation. Reports are that there is $400 million in deferred compensation at risk, which goes to Credit Suisse if not paid to the employees.

Let’s review. Credit Suisse cannot profitably run a brokerage firm. It decides to shut down that business. Rather than attempt to sell the business, it enters into a recruitment agreement with Wells Fargo, where it gets a percentage of revenue generated by every representative who goes to Wells. And if they don’t go to Wells, Credit Suisse keeps their deferred compensation.

Nope, sorry, that is not the way it works. Deferred compensation is the property of the employee, and the employer does not get to take it back because it doesn’t have the skill set to run the business.

Credit Suisse brokers need to call my office. You are getting screwed.

Call me - 212-509-6544 


Related Articles:

Transition Agreements are Negotiable - Even for Credit Suisse Brokers

Time to Ban Mandatory Deferred Compensation - Morgan Stanley Admits It Uses Employee Funds For Its Own Benefit

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Mark Astarita is a nationally recognized securities lawyer who has spent the past 25 years representing brokers and financial advisers across the country in their disputes with their firms. He can be contacted by email at mja@sallahlaw.com or by phone at 212-509-6544.

Related articles

Time to Ban Mandatory Deferred Compensation - Morgan Stanley Admits It Uses Employee Funds For Its Own Benefit

Morgan Stanley is not the only one who does it - almost all of the larger brokerage firms require large producers and executives to take their compensation on a deferred basis - often up to 50% of regular compensation and 80% of bonuses.

Like most of these types of policies, the firms attempt to convince employees that the deferral is for the benefit of the employee - deferred taxes and all of that nonsense. However, employees are well aware that deferred comp is simply a way to keep employees from leaving - imagine a system where your boss holds a portion of your pay, and you can only get it if you stay at the firm for another three years.

Welcome to the world of deferred compensation.

But there is another side of the issue - by delaying payment of salary, commissions and bonuses, the firms save a significant amount of money in that fiscal year, and they do it to shore up their balance sheets, not because they are trying to help their employees.

Morgan Stanley said on Friday it will pay more of its bonuses to employees upfront and defer less, because the bank is on a better financial footing and can move its pay practices more in line with those of competitors.

The firm admitted that it will be paying out an additional 1.2 BILLION DOLLARS by decreasing the amount of required deferral. Flip that around. The firm was saving something on the magnitude of a billion dollars a year by forcing its employees into a deferred compensation arrangement.

The firms also take the position that you don't get your pay, which you earned, but has been deferred, if you leave, or get fired, before it vests.

That figure alone demonstrates the significance of deferred compensation, the reality is that it is a way for the firms to save money by withholding compensation, and why Congress should ban the practice of mandatory deferred compensation.

Original Article: Morgan Stanley to defer less of employees' future bonuses

--- 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 employment contracts, promissory notes and employment litigation, nationwide. For more information call 212-509-6544 or send an email.