Merrill Lynch Appeals $10.2 Million FINRA Decision

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 brokers, Tamara Smolchek and Meri Ramazio, sued Merrill Lynch 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.”

Zamansky and Associates, a New York law firm specializing in securities fraud and financial services litigation and arbitration, announced Thursday that it would investigate Merrill Lynch’s treatment of departing advisers’ deferred compensation under several plans offered by the firm.

“We’re taking a look at Merrill Lynch following calls from financial advisers complaining about the way they were treated. We believe they’ve acted improperly. They refuse to give anyone deferred compensation,” Jake Zamansky, a partner at Zamansky and Associates, told PLANADVISER. “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 earned.”

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, because the panel arbitrator, Bonnie Pearce, is the spouse of another lawyer, a plaintiffs’ attorney who has 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 while the claimants did not have to face similar restrictions or sanctions.