At least 240 brokers are filing arbitration claims against Merrill Lynch in a dispute over deferred compensation, AdvisorHub reports.
The Feb. 13 court filing alleges Merrill Lynch wrongly withheld their deferred compensation when they changed firms, in violation of a federal retirement law.
The arbitration cases are part of an intervening motion in a separate class action claim filed last May by a former Merrill Lynch broker in California who alleged the firm illegally withheld his deferred compensation when he left the firm in 2021. The lead plaintiff, Kelly D. Milligan, spent 21 years with Merrill Lynch and claimed he was forced to relinquish $500,000 in deferred compensation.
Milligan asserted that Merrill Lynch invoked its “Cancellation Rule,” in which he said Merrill mandated that advisors forfeit the compensation in plan accounts if they left the firm before a “vesting” date (a contractually allotted amount of time the employee must be with the company before benefitting from the plans).
The complaint stated that advisors would automatically allocate a portion of their commissions each year to the “WealthChoice Contingent Award Plan.” Those commissions would be allocated into individual plan accounts, which would “vest” within eight years. According to the complaint, at least 5% of an advisor’s pay would be withheld yearly.
Milligan argued the plan was an “employee benefit pension plan” because it resulted in a deferral of employees’ income that extended to that employee’s termination. Therefore, he said it was protected under the Employee Retirement Income Security Act. (ERISA)
Merrill contends the awards “easily fall” within the rules set by the federal government for bonuses, rather than under ERISA. The plan does not “systematically defer payment to termination or beyond,” so ERISA does not apply, Merrill had argued.
In last month’s filing, seven ex-Merrill brokers who had filed arbitration cases asked a federal judge to stay the proposed class action while the arbitration claims are pending. The brokers filed the request out of concern that an unfavorable ruling from the judge on Merrill’s request for dismissal could hinder their odds of success in arbitration.
Merrill Lynch asked FINRA arbitrators to pause the arbitration cases until the court rules on the firm’s motion for summary judgment, filed in September 2024.
Those who choose to work in the financial services industry face a range of complex rules and regulations. If you are under investigation by your firm, terminated for cause or considering voluntarily leaving your firm, it is imperative that you hire counsel to advise you properly and protect your record. The attorneys at Lewitas Hyman have years of experience advising both financial advisors and financial firms on various types of employment issues, including deferred compensation. For more information about our financial services employment practice, please contact Lewitas Hyman at (888) 655-6002 or through our online contact form.
