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Wells Fargo Settles Deferred Comp Class Action For $7.4 Million

By George C. Miller, Esq. of Shustak Reynolds & Partners, P.C. posted on Tuesday, November 25, 2014.

Wells Fargo Advisors recently agreed to pay in excess of $7.4 million to settle a class action claim alleging the firm wrongfully withheld deferred compensation from retirement-aged advisors.  The settlement is expected to be confirmed at an upcoming hearing in the Northern District of California.

As is fairly common in the securities industry, Wells Fargo pays its advisors incentive compensation when they reach certain production hurdles.  The compensation vests over a period of years, and Wells Fargo, like many firms, took the position the compensation would be payable only if the advisor remained employed through the vesting period.  Wells Fargo’s plan also allowed retirement-eligible advisors to retire and keep their deferred compensation as long as they did not re-enter the industry and work for a competitor for at least three years.

Kennison Wakefield and William Stonhaus, two named plaintiffs in the case, were eligible for retirement and believed their deferred compensation was fully vested.  When they resigned from Wells Fargo and joined a competitor, however, Wells Fargo took the position they had forfeited a substantial portion of their deferred compensation.  Their attorneys filed suit, arguing Wells Fargo’s plan violated California and North Dakota employment and anti-trust laws.  While Wells Fargo denied liability, the firm stopped enforcing similar forfeiture language in California and North Dakota in 2012 and has now struck a settlement that will pay an estimated $5.6 million to the named plaintiffs and approximately 133 other brokers.  The remaining settlement funds have been earmarked for attorneys’ fees and costs.

The position Wells Fargo initially took is not uncommon.  Shustak Reynolds & Partners, P.C.’s New York, San Francisco, Irvine and San Diego FINRA attorneys have extensive experience in representing registered representatives and investment advisors in a variety of securities-industry matters, including deferred compensation forfeiture claims, bonus disputes and SEC and FINRA regulatory investigations and enforcement proceedings.  Contact us today for a confidential analysis of your situation.

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