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.

Wells Fargo Gets Fined...Again

 What happened to Wells Fargo? Fine after fine. My friends from Wachovia who are still there must be shaking their heads. This fine is for the same violation that Wells Fargo was fined for in 2016.

FINRA Fines Wells Fargo $2.25M Over Handling of Client Data

Small Account Policies Hurt Advisers, Force Transitions

Small account policies at brokerage firms are understandable from a business perspective, but are a significant problem for the customer and the firm's advisors.

Brokerage firms do not want to spend the time or resources in dealing with small account (typically accounts with under $250,000 in equity). At the same time, they do not want to give up those accounts and the revenue they generate.

To remedy this dilemma, firms created "call centers" and forced brokers to transfer their small accounts to those call centers, where investors' accounts are handled by a random selection of advisers. The investor loses his adviser, and the adviser loses his customer. Not a good solution for the investor, but one that brokerage firms have been using with increasing frequency.

These policies at Wells Fargo, Merrill Lynch, RBC Wealth Management and other full-service firms have been imposing are particularly irksome to advisors in small markets that are not traditional pockets of wealth.

For example, according to AdvisorHub a Wells Fargo broker in Indiana cited small-account policies when he moved his family team to Stifel in June, as did a Colorado independent broker who joined LPL Financial in May after affiliating with Wells for 38 years.

Wells Fargo Advisors’ 2020 compensation plan penalizes private client group brokers with payouts of 20% on household accounts with less than $250,000—up from the previous floor of $100,000. Brokers at Wells typically keep 50% of clients’ fees and commissions after meeting monthly revenue hurdles.

-------------

https://advisorhub.com/wells-brokers-with-405-million-leave-for-stifel-cite-small-account-policies/

-----------

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.

Indicting Corporate Officers?

A common criticism of our system of securities and banking regulation is that the regulators do not punish the executives at the large banks who create, or permit, the wrongful conduct. Of course, they will fine the same executives at a small bank, but executives at the large banks seem to get away unscathed.

Take for example Wells Fargo's phony account scandal. In September 2016,Wells Fargo agreed to pay $185 million in fines in connection with the more than two million customer accounts that had been flagged as potentially unauthorized. Wells Fargo also disclosed that it was facing investigations by the Justice Department and the Securities Exchange Commission.

Then there was no significant news on the matter for three years. except for Wells Fargo bankers and brokers who continued to lose clients because of the bank's scandals, and the firm's difficulty in recruiting brokers to join the firm.

After hints during the last two years that indictments were in the making, On Wall Street  reported this week that "[m]ultiple former high-level Wells Fargo executives are under criminal investigation in connection with the bank’s fake-account scandal and could be indicted as soon as this month."

Indictments of executives will depend on who knew what, and when they knew it. According to press reports, some executives have been forced to resign, but to our knowledge, none of lost their licenses or been indicted.

Yet.

Wells Fargo Increases Retirement Payout

UBS did it, and now Wells Fargo has changed its broker retirement program, increasing the payout to a retiring broker and to the broker who gets his accounts. Wells Fargo says that under its new program, retiring advisers can receive a payout of up to 225% of their 12-month trailing production. The number varies in part based on the valuation of the book agreed upon by the retiring and inheriting advisers.

Wells Fargo is also offering a loyalty award equal to 25% of the retiring adviser's T-12.

The inheriting advisor, meanwhile, gets a payment of up to 100% of the retiree’s T-12 which helps offset the cost of the acquired book, according to Wells Fargo. The payment, in the latter instance, comes in two installments, one at the departing adviser's retirement day and a second three years later, according to the firm.

The program comes with a non-solicit agreement for the retiring broker, which some in the industry press are criticizing. While non-solicit and non-compete agreements often harm the employee and restrict his ability to work, the non-solicit is completely appropriate in this situation, as Wells Fargo is paying the retiring broker for those very clients. Leaving the ability to accept the payment, and then attempt to solicit the client to leave the the firm, would have Wells Fargo paying significant sums of money for nothing.

By the way, UBS' retirement program has a higher payout.

---

Mark Astarita represents financial professionals in their employment, regulation and compliance matters and has done so for over 30 years. For a review of your transition agreement, or your firm's retirement program or for more information call Mark at 212-509-6544 or send an email to mja@sallahlaw.com

Wells Fargo to pay Brokers

According to InvestmentNews.com Wells Fargo Advisors will pay $9.5 million to settle a class action suit brought by 2,198 current and former brokers in California, who had charged that the firm failed to pay commissions in a timely manner.

http://www.investmentnews.com/article/20180430/FREE/180439991/wells-fargo-to-pay-9-5-million-to-reps-in-compensation-dispute

Wells Fargo Wins Bank Arbitrations? Maybe not

The LA Times published this article, based on a study that we can't find.

Admittedly I haven't seen the study, and am only commenting on the article. If anyone has a link to the actual study, I would love to review it.

One more caveat - I don't know anything about these Wells Fargo arbitrations, but I do know something about consumer arbitrations - having represented investors and financial firms in well over 600 such arbitrations over the years.

While the article references a 35% "win" rate for customers, it overlooks the fact that 55% of the arbitrations settled - presumably the customer received a settlement that was satisfactory to him or her.

And, since the article says that the customers won in 35% of the other cases, that indicates that customers received awards or settlements in 70% of the cases that were brought.

The fact is that many customers represent themselves because an attorney won't take the case, and some cases are bad cases. Customers don't lose all of their cases because the process is bad, some, like in court, lose because their claims are bad.

And, the fact that Wells Fargo was awarded damages in some of those cases indicates to me at least, that these weren't all customer claims against the bank - some of them had to be the bank collecting money it was owed by customers.

I am not defending Wells Fargo here - what they did is outrageous - but that is not cause for attacking the arbitration process.
Here's why Wells Fargo forces its customers into arbitration: It wins most of the time 

---.
Mark Astarita is a securities attorney who has represented parties in over 600 securities arbitrations and countless SEC and FINRA proceedings, across the country for 30 years. He is a partner in the law firm of Sallah Astarita & Cox and can be contacted at mja@sallahlaw.com

Wells Fargo to pay $35M to more than 500 black advisers over discrimination claims

 "The Wells Fargo case was brought by six black brokers who said in a revised complaint filed Friday in Chicago federal court that the bank “engaged in an ongoing nationwide pattern and practice of race discrimination.”



Wells Fargo to pay $35M to more than 500 black advisers over discrimination claims

Senator Pushes FINRA to Hurry Reviews of Fired Wells Fargo Brokers

Wells Fargo & Co. is facing increasing scrutiny from lawmakers over the potentially wrongful dismissals of financial advisers and other employees who pushed back on questionable practices during the bank's multiyear cross-selling scandal.

The latest salvo comes from Sen. Bob Casey (D., Pa.), who, in a letter Wednesday to the Financial Industry Regulatory Agency, the brokerage industry's self-regulatory body, asked for an expedited review process to determine whether any Wells Fargo employees were unfairly dismissed as retribution for speaking out or not cooperating with aggressive cross-selling tactics, according to the letter reviewed by The Wall Street Journal.

FINRA in response to an earlier inquiry from lawmakers, said that of the 5,300 employees fired during a five-year period, more than 600 from Wells Fargo's wealth-management division had received termination filings known as Form U5s. These forms chronicle the reasons for the dismissals of brokerage employees, and negative justifications can hinder an adviser from gaining employment elsewhere in the industry."

Senator Pushes Finra to Hurry Reviews of Fired Wells Fargo Brokers


---
The attorneys of Sallah Astarita & Cox have decades of experience in representation of brokers in expungements and other  U4 and U5 issues. Call them at 212-509-6544 or send an email. for more information on correcting your CRD record

Brokers Not Buying the Credit Suisse Wells Fargo Deal

That exclusive deal between Credit Suisse and Wells Fargo is not working out as planned. As advisers and their counsel examine the deal, and the transitioning adviser's options, the Wells Fargo deal has some significant issues.

Credit Suisse is shutting down its private banking operations and last month announced a transition agreement that lets Credit Suisse brokers move to Wells Fargo. We believe that many brokers will take advantage of the deal, if for no reason other than Credit Suisse has threatened to withhold their deferred compensation if they do not go to Wells Fargo.

However, large producers do not like the deal, since there is a cap of $5 million on transition bonuses. For producers who are generating 2-3 million in revenue, and with firms paying 2-3 times trailing 12 as an upfront loan, a five million dollar cap is obviously an issue.

Wells Fargo is attempting to address that concern by offering an additional $2.5 million in deferred compensation vesting over 4 years, but that might not be enough to lure the Credit Suisse brokers. Other firms have stepped into the void, including UBS which has been aggressively recruiting brokers.

Last week a Credit Suisse team left with $3.2 billion in assets and went to UBS. Today's defection goes to Morgan Stanley, as a team managing 5 billion dollars at Credit Suisse has joined Morgan Stanley in New York.

Related Posts:

Transition Agreements are Negotiable - Even for Credit Suisse Brokers

Credit Suisse Brokers Losing Deferred Compensation

---
Mark Astarita is a nationally known securities lawyer who has represented brokers and advisers in their transitions, loans and compensation issues for decades. He has negotiated deals, settlements and agreements with every major brokerage firm and dozens of regional firms. Mark has also represented brokers in disputes with every firm and does so in an efficient and cost effective manner. Call him for a free telephone consultation, and let’s see how I can help you. 212-509-6544 or email - mja@sallahlaw.com

Transition Agreements are Negotiable - Even For Credit Suisse Brokers

In October of this year, Credit Suisse announced that it was closing its retail brokerage unit and that it had signed a recruiting arrangement with Wells Fargo. That arrangement lets Credit Suisse brokers who are hired by Wells Fargo to smoothly transition their practices and clients to the Wells Fargo Advisors arm by early next year.

That agreement seemed to be a welcome solution to the recruiting issues that arise when a large number of retail brokers changed firms, but that soon changed. Wells Fargo put a cap on the upfront loan, which traditionally has been 2-3 times trailing twelve. For some brokers, their upfront loans would be more than $5 million, which is where Wells Fargo set the cap.

That cap then starts to unravel the benefit of entering into the recruiting agreement, because the brokers are not bound to deal with Wells Fargo. Brokers complained, and since firms like  Merrill Lynch, Morgan Stanley and UBS do not impose such caps. Credit Suisse brokers were encouraged to discuss relationships with those firms.

Credit Suisse brokers need to keep in mind that they are not locked into any particular deal, even if they go to Wells Fargo. Despite popular opinion, all employment deals, including transition bonuses, upfront loans and hurdles are negotiable, as demonstrated by Wells Fargo decision to modify the upfront cap for brokers who are affected, and sometimes offering $2.5 million in new deferred compensation that vests over four years.

Related Stories:

Credit Suiss Advisors Free to Move to Wells Fargo

Wells Fargo and Credit Suisse strike recruiting deal for 250 advisers

Credit Suisse brokers not happy with move to Wells Fargo

Wells Fargo-Credit Suisse Deal: First FA Out Picks Merrill

Broker Dealers Move to Banking Fueling Transitions?

Advisors Have Leverage In Employment Agreements

Reviewing Broker Transition Agreements

--------------------
Mark Astarita is a nationally known securities lawyer who has represented brokers and advisers in their transitions, loans and compensation issues for decades. He has negotiated deals, settlements and agreements with every major brokerage firm and dozens of regional firms. Mark has also represented brokers in disputes with every firm and does so in an efficient and cost effective manner. Call him for a free telephone consultation, and let’s see how I can help you. 212-509-6544 or email - mja@sallahlaw.com

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

---
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.

Related articles

• Good Markets, More Broker Transitions 
• DealBook News Analysis: In Credit Suisse Settlement, a Question of Justice

RIA State Registration Deadline Approaches

This Thursday is the deadline for mid-sized RIAs who no longer meet the $90 million AUM number to register with their states rather than the SEC, and it appears that many have not done so. Financial-planning.com sys that hundreds of medium-size RIAs are procrastinating and have not made their state registrations.

Despite numerous messages from the SEC, it appears that many advisors have not made the registration filings, and there is no guarantee that the state will accept the filings, even if filed on time.

With roughly 2,500 RIAs affected by the change in registration requirements, there could be a signficant number who are going to be late, and who may face issues with not being registered with any regulator, a potential violation of state and federal law.

If you are one of the firms that has not made your state filings, contact us at info@seclaw.com and we will see if we can assist you with your registration, or help you find someone to help you with the process.

Financial-planning.com has more details at Procrastinating RIAs Could Face SEC De-Registration

FINRA Fines Citi, Morgan, UBS and Wells $9.1 Million for ETFs

FINRA announced that it has fined Citigroup Global Markets, Inc; Morgan Stanley & Co., LLC; UBS Financial Services; and Wells Fargo Advisors, LLC a total of more than $9.1 million for selling leveraged and inverse exchange-traded funds (ETFs) without reasonable supervision and for not having a reasonable basis for recommending the securities. The firms were fined more than $7.3 million and are required to pay a total of $1.8 million in restitution to certain customers who made unsuitable leveraged and inverse ETF purchases.

Brad Bennett, FINRA Executive Vice President and Chief of Enforcement, said, "The added complexity of leveraged and inverse exchange-traded products makes it essential that brokerage firms have an adequate understanding of the products and sufficiently train their sales force before the products are offered to retail customers. Firms must conduct reasonable due diligence and ensure that their representatives have an understanding of these products."

We have represented investors who lost significant sums of money in leveraged ETFs, which are securities which seek to deliver multiples of the performance of the index or benchmark they track. Inverse ETFs seek to deliver the opposite of the performance of the index or benchmark they track, profiting from short positions in derivatives in a falling market.

FINRA found that from January 2008 through June 2009, the firms did not have adequate supervisory systems in place to monitor the sale of leveraged and inverse ETFs, and failed to conduct adequate due diligence regarding the risks and features of the ETFs. As a result, the firms did not have a reasonable basis to recommend the ETFs to their retail customers. The firms' registered representatives also made unsuitable recommendations of leveraged and inverse ETFs to some customers with conservative investment objectives and/or risk profiles. Each of the four firms sold billions of dollars of these ETFs to customers, some of whom held them for extended periods when the markets were volatile.

 More...

The Credit Crisis Visualized

Very well done explanation of the credit crisis. Given the medium and a running time of 10 minutes, there are some oversimplifications, and one could quibble with some of the underlying assumptions, but if you want a good overview of what happened, spend 10 minutes here. No politics, no fingerpointing, just an explanation.

Wachovia employees whacked by Wells Fargo

Corporate retribution is an understatement. Changing firms is a fact of life in the brokerage industry. Firms offer their competitors' brokers bonuses as forgivable loans to leave, and they all do it. Now Wells Fargo has apparently decided to punish brokers and staff who left Wells Fargo to go to Wachovia.

Wells Fargo got the opportunity to smack its former employees when it purchased Wachovia. And retribution is tough - Wells fargo promptly fired 175 Wachovia employees who had previously left Wells Fargo to go to Wachovia.

They even have a list, called the "conflict employee summary" of the emploess when they wanted to can. And Investmentnews reports that brokers are among those being fired.

It will be interesting to see what happens with the U-5 and the forgivable loan repayments. I hope Wells Fargo has a decent reserve for litigation costs, but retribution can be costly.