On January 9, 2019, a Financial Industry Regulatory Authority (FINRA) panel found a former Edward Jones broker liable for $24,873 in compensatory damages due to the broker’s breach of contract and restrictive covenant with the firm. See Edward Jones v. Prospera Financial Services, Inc. and Jay Ralph Slouffman, FINRA Office of Dispute Resolution, No. 17-03220 (Jan. 9, 2019). The former broker oversaw roughly $186 million of customer assets at Edward Jones before he moved to Prospera Financial Services, an independent broker-dealer firm.
In its FINRA complaint, Edward Jones alleged that the former broker and the independent broker-dealer he affiliated with are using a list containing confidential and proprietary information, including the identity, primary phone number, call preference, account number, and address of over a thousand Edward Jones clients, in order to solicit those clients and induce them to terminate their relationship with Edward Jones. Edward Jones also sought a permanent injunction preventing the broker from soliciting his former clients. It requested nearly $219,000 in compensatory damages plus attorneys’ fees and costs. The three-person FINRA panel awarded the firm approximately 11% of its requested damages and denied all other claims for relief, including attorneys’ fees.
This award highlights the extreme importance of following protocol when leaving a member firm. Brokers and financial advisors that leave member firms and remain in the industry must be diligent and remember to read their contracts.
Shustak Reynolds & Partners, P.C. focuses its practice on securities and financial services law and complex business disputes. We routinely represent broker-dealers and financial advisors in arbitrations, financial advisor transitions, broker protocol disputes and related matters. Please contact us today for a confidential, complimentary consultation.
On December 5th, a Financial Industry Regulatory Authority (FINRA) panel in New York city awarded a former Wells Fargo financial advisor, Christopher John Tisi, $750,000 in a claim against Wells Fargo Advisors, LLC for deferred compensation. See Tisi v. Wells Fargo Advisors, LLC, FINRA Office of Dispute Resolution Award, No. 14-00278 (Dec. 5, 2018). Tisi and the other claimant, another former Wells Fargo advisor and Tisi’s business partner, sought approximately $220,000 in deferred compensation plus unspecified money damages. The other claimant withdrew from the arbitration after reaching a confidential settlement with Wells Fargo.
In their Statement of Claim, the two advisors asserted allegations of fraud based on material misrepresentations, omissions and lies, coercion, egregious regulatory violations, improper conversion of deferred compensation, defamation, seeking to destroy lucrative business, quantum meruit, and unjust enrichment. The former Wells Fargo advisors sought compensatory and punitive damages for their deferred compensation, growth bonus, and ongoing revenue. They also requested damages for damage to their reputation. Wells Fargo denied all allegations and counterclaimed, arguing that the claimants breached their promissory note agreements with the firm.
The FINRA panel did not provide an explanation for the award. However, after considering the pleadings, testimony, and evidence presented at the hearing, the panel found Wells Fargo liable to Tisi for $750,000 in compensatory damages.
Shustak Reynolds & Partners, P.C. focuses its practice on securities and financial services law and complex business disputes. We routinely represent broker-dealers and financial advisors in arbitrations, financial advisor transitions, broker protocol disputes and related matters. Please contact us today for a confidential, complimentary consultation.
Robert Berry worked as a financial advisor for Wells Fargo Advisors, LLC from 1994 until 2014. From 2005 to 2014, he participated in the Wells Fargo Advisors Performance Award Contribution and Deferral Plan. The plan provides retirement benefits to advisors, and some advisors can accrue hundreds of thousands of dollars in deferred compensation. Advisors can earn deferred compensation based on their performance or certain recruitment incentives. The plan, however, contains a “Forfeiture Clause” under which participants forfeit the unvested portions of their accounts when they leave Wells Fargo. Certain exceptions to the forfeiture clause apply, such as when the plan participant dies; is laid off; or is at least 50 years old, has worked for Wells Fargo for at least three years, and agrees not to work for a bank, investment advisor, mutual fund, insurance company, or financial planner for three years. Berry alleges that the forfeiture clause is unenforceable under the Employee Retirement Income Security Act (“ERISA”). Wells Fargo seeks to classify the plan as a “top hat” plan, available only “for a select group of management and other highly compensated employees.”
Berry left Wells Fargo after 20 years in 2014, at 62 years old. He later began working as a financial advisor at another company. As a result of the forfeiture clause, he forfeited nearly $200,000 of deferred compensation. Seeking to recover forfeited deferred compensation, Berry brought a claim against Wells Fargo in the South Carolina federal district court on behalf of himself and other similarly situated employees. He moved for class certification to pursue damages and injunctive relief against Wells Fargo for violations of ERISA.
The district court granted Berry’s class certification motion on October 9. First, the court held Berry had standing because his injury is redressable through reformation of the plan and payment of benefits under the plan. Second, the court held the proposed class definition is proper for pursuing the ERISA claim, and the proposed class meets the requirements of Rule 23 (Class Actions) of the Federal Rules of Civil Procedure. In short, the court granted Berry’s motion to certify class under Rule 23–certifying all participants in the plan since February 1, 2011 who have been denied compensation under the forfeiture clause–and appointed Berry as Class representative.
Shustak Reynolds & Partners, P.C. focuses its practice on securities and financial services law and complex business disputes. We routinely represent broker-dealers and financial advisors in arbitrations, financial advisor transitions, broker protocol disputes and related matters. Please contact us today for a confidential, complimentary consultation.
