Merrill Lynch owes stiffed brokers $800,000 in damages after termination dispute, Finra says

Arbitration panel pointed to customer letters as evidence the brokers had done nothing wrong

Oct 10, 2016 @ 12:47 pm

By Christine Idzelis

Bank of America Merrill Lynch has to pay $800,000 in compensatory damages to two brokers who claimed the firm stiffed them in compensation after they were fired without cause, according to the Financial Industry Regulatory Authority Inc.

Merrill Lynch alleged that Roman Reed and Victor Barrionuevo owed the firm money under a promissory note agreement they signed when they were hired in April 2009, according to Finra arbitration document dated Oct. 7. The brokerage firm claimed about $1.6 million in damages after their employment was terminated “for cause” in 2015, citing the outstanding balance of the promissory notes and unjust enrichment.

Merrill had accused Mr. Reed and Mr. Barrionuevo of improperly handling a customer complaint, violating the firm's rules and industry standards by not immediately informing their employer of the client's dissatisfaction. The brokers filed a counterclaim of fraud, defamation and tortious interference with an existing contract, saying there was no cause for termination and that Merrill had financial incentive to fire them.

Disputes over the promissory notes often end up in Finra arbitration cases as brokers keep battling to hold onto related cash they receive when joining a firm and for reaching certain performance targets. The decision in favor of the former Merrill brokers stands out because financial advisers typically lose to their former employers.

“The panel does not find credible Merrill Lynch's explanation for the brokers' termination,” according to the arbitration award document. “The evidence bears out that the brokers were fired because Merrill Lynch wanted to retain the customer's lucrative business without having to honor the transitional compensation contract with the brokers.”

While the brokerage firm said it settled with the customer due to feared legal action, the Finra panel saw little litigation risk due to two letters it had in hand from the customer indicating there was no wrongdoing.

“The letters from the customer state explicitly that the brokers had done nothing wrong with the handling of his complaints and that no negative action against the brokers was called for,” according to the Finra arbitration document. ”The customer admitted that he was surprised that Merrill Lynch offered him a settlement, much less a settlement that exceeded the amount he demanded.”

The settlement only reinforced the notion that retaining the customer's business was Merrill Lynch's primary concern, according to the Finra panel, which recommended their termination record be expunged of the alleged wrongdoing.

Merrill is also responsible for the brokers' attorneys' fees, which totaled $215,000, bringing the firm's tab to slightly more than $1 million, the document shows.

Susan Atran, a spokesperson for Merrill Lynch, didn't immediately return a phone call seeking comment.


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