What Did Your Brokerage Firm or Investment Adviser Do Wrong With GWG
Published On: August 11, 2022

Stoltmann Law Offices is investigating cases where brokerage firms haven’t paid their representatives. In a new arbitration filing, 10 ex-Morgan Stanley brokers in the New York City area raised claims that the firm “improperly deferred” compensation in violation of the Employee Retirement Income Security Act of 1974 (ERISA) and also violated New York state law by withholding those funds when they left, according to Advisorhub.com.

“When claimants  (the brokers) – after many years of working for Morgan – decided to part ways with their employer, Morgan Stanley decided to deny them a substantial portion of the compensation that their brokers had earned for their dedicated work, and keep their hard-earned money to itself,” lawyers for the 10 brokers wrote in the complaint, which also tacks on a claim of violations of FINRA’s catch-all Rule 2010 requiring members act with “high standards.,”  advisorhub.com reported.

In 2020, several ex-Morgan advisors filed a class-action lawsuit against the company. The complaint “alleges that financial advisors may lose substantial amounts of their deferred compensation when they leave the company, and that this is not lawful because the deferred compensation plan (it alleges) is governed by the Employee Retirement Income Security Act of 1974 (ERISA).”

“According to a FINRA complaint, Morgan Stanley has been facing a wave of individual claims already in arbitration from brokers around the country. A spokesperson for Morgan Stanley, which has roughly 16,000 brokers on its roster, declined to comment. Morgan Stanley previously argued in the proposed class action suit that the deferred compensation program is a bonus plan, which is generally not covered by ERISA.”

Financial advisors (FAs) who work for Morgan Stanley received deferred compensation depending on how their clients invest, according to class actions reporter. “FAs earn commissions, which are turned into credits, and divided into Cash Credits or Deferred Credits—the deferred compensation.”

“About 75% of the deferred credits go into the Morgan Stanley Compensation Incentive Plan (MSCIP) and the other 25% go into the Equity Incentive Compensation Plan (EICP). The MSCIP credits are held as a cash amount. The EICP credits are turned into restricted stock units (RSUs) that eventually converted in to shares of Morgan Stanley stock.” However, when FAs leave the company, MS allegedly applied a “cancellation rule” to deny them compensation.

Morgan Stanley causes advisors to “forfeit their deferred compensation if they leave Morgan Stanley before these vesting dates,” the class-action complaint alleges.

In 2020, rival Wells Fargo agreed to pay $79 million to settle a similar class-action complaint related to deferred compensation for former advisors at that firm.

Brokerage firms are obligated to pay their representatives what they owe them in compensation and commissions. When employers fail to pay their employees, broker-advisors can file FINRA arbitration claims.

If you are a financial advisor and your brokerage firm stiffed you on compensation owed to you, you may have a claim to pursue through FINRA Arbitration. Please contact Stoltmann Law Offices, P.C. at 312-332-4200 for a free, no obligation consultation with a securities attorney. Stoltmann Law Offices offers a wide range of fee arrangements for our broker-clients.


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