After the Financial Industry Regulatory Authority (FINRA)
ordered Merrill Lynch to pay $10.2 million in deferred compensation and
punitive damages to two former brokers in Florida, the brokerage firm said it
would appeal the decision.
Two former Merrill Lynch brokers, Tamara Smolchek and Meri
Ramazio, sued the company for deferred compensation they lost after leaving for
Morgan Stanley in 2008.
Calling FINRA’s decision “radically wrong,” Bill Halldin, a
spokesman for Bank of America Merrill Lynch, said, “the amount of the award
bears no relation to the damages at issue.” In its petition to vacate, filed
Tuesday immediately after FINRA’s decision, Merrill Lynch said the decision is
“radically different than findings where similar issues have been reviewed.”
Shortly after, Zamansky and Associates, a New York law firm
specializing in securities fraud and financial services litigation and
arbitration, announced it will investigate Merrill Lynch’s treatment of
departing advisers’ deferred compensation under several plans offered by the
“We’re taking a look at Merrill Lynch, following calls from
financial advisers complaining about the way they were treated,” Jake Zamansky,
a partner at Zamansky and Associates, told PLANADVISER. “We believe they’ve
acted improperly. They refuse to give anyone deferred compensation. They’re
supposed to act in a good-faith manner and not just shut the door on anyone
who leaves for a valid reason. Advisers are entitled to be paid what they
Zamansky called Merrill Lynch’s chances of prevailing on
appeal “slim” and speculated the decision is likely to stand. “Merrill Lynch is
very good at doing due diligence,” he said, which would negate its claim that
there was any conflict of interest on the part of the panel chairman. Arbitration
awards are generally “upheld on appeal,” he said.
But according to Merrill Lynch, the FINRA hearing was
inherently unfair—the panel arbitrator, Bonnie Pearce, is the spouse of another
lawyer, a plaintiffs’ attorney who successfully sued Merrill Lynch at least
five times on behalf of brokers or customers. Pearce did not disclose this
information, Merrill Lynch said in its filing, or they would have stricken her
during the arbitrator selection process.
In its filing, the brokerage outlines rulings made
during the hearing that, it says, prohibited it from introducing relevant
evidence crucial to its defense. Merrill Lynch was severely limited in its
presentation of its case and threatened with sanctions, whereas the claimants
did not face similar restrictions or sanctions.