By Erwin J.Shutak, Esq.  of Shustak Reynolds & Partners, P.C. posted on Tuesday, December 22, 2015.

Erwin J. Shustak

Managing Partner

Location: San Diego, California
New York, New York
Phone: (619) 696-9500 (Ext. 109)
(800) 496-5900 (Ext. 109)
Email: [email protected]

As we reported previously, Credit Suisse has decided to exit the retail U.S. brokerage market and has been in discussions with Wells Fargo to transition Credit Suisse brokers to Wells Fargo where they can have access to and sell CS products. It seemed like a “win-win” for both Credit Suisse and Wells Fargo. The only problem, however, is no one bothered to ask the soon-to-be former Credit Suisse brokers where they wanted to move their books of business. Turns out many of them prefer UBS over Wells Fargo. Therein lies the problem, according to Credit Suisse.

After more than 70 Credit Suisse brokers spurned the offer to join Wells Fargo and, instead, opted to join UBS, Credit Suisse decided to fight back and brought a raiding claim against UBS before FINRA, the Financial Industry Regulatory Authority. The only problem is, however, Credit Suisse may not have a leg to stand on. After announcing it was going to exit the retail securities business in the U.S., and inviting its brokers to consider switching to Wells Fargo (without their vested, deferred comp which, of course, would be forfeited and revert- you guessed it, Credit Suisse), many of the affected Credit Suisse brokers decided they didn’t want to move to Wells Fargo and they started to transition to UBS in droves.

Among the many reasons why a CS broker would prefer to move to another international powerhouse like UBS is the  onerous 13-year employment requirement, far longer than the industry norm, that Wells Fargo wanted to hit them with. Closer to indentured servitude than free market signing arrangements. Additionally Credit Suisse advisors have misgivings regarding the Wells' brand and capabilities to serve their well-heeled clientele more used to an international financial institution than a U.S. bank based brokerage firm. The UBS offering offered a more standard contract coupled with a 175% upfront bonus, which recruiters note is very generous.

Including those leaving for UBS, Credit Suisse has lost about a third of its 270 advisors since announcing the deal, according to On Wall Street reporting and people familiar with the departures.

According to Erwin Shustak, Esq. of Shustak Reynolds & Partners, p.c., who has been involved in many raiding and transition fights over the years, once Credit Suisse decided to exit the U.S. retail brokerage business, it has no legal basis for a raiding claim. According to Shustak, “How can you raid a brokerage firm which already has announced to its brokers, and the world, that it is leaving the entire business? You can’t. Any arbitration panel will most likely just throw this case out once they have all of the facts”. “The real reason for the suit is to scare the remaining brokers into going to Wells Fargo, which is in CS’ best interest” he added.      

Shustak Reynolds & Partners, P.C. has extensive experience in the area of securities and financial services law and routinely counsels investors, brokers, broker-dealers and registered investment advisors. For more information  contact Erwin J. Shustak, Esq, Managing Partner, at 619.696.9500 or via email at [email protected] or visit our web site at www.shufirm.com

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