Merrill Lynch continues to turn up the heat on brokers who leave.
In a recently released case, a three-member NASD arbitration panel decided in August to prohibit former Merrill rep Jeffrey Bass "from soliciting, directly or indirectly, any client" he acquired during his 15-year tenure at Merrill Lynch. The injunction lasts until May 7, 2000. Bass left the firm May 7, 1999.
According to the award summary, Merrill argued that Bass' training agreement, signed in 1984, prevented him from soliciting clients for one year. Such noncompete agreements are standard in the industry.
Cases like Bass' are usually settled within a few weeks or months. But industry lawyers say Merrill has increasingly pushed to enforce its one-year noncompete clause in an attempt to stem defections. Merrill claimed in this case that Bass was the fourth broker in four months to leave its Columbia, Md., branch to join Morgan Stanley Dean Witter.
The arbitrators permitted Bass and MSDW to accept unsolicited account transfers from Merrill clients. But in an unusual twist, the panel allowed the transfers only if Bass "fully discloses" to those clients the "compensation, incentives and bonuses" he was paid by MSDW.
Merrill claimed brokers recruited by MSDW had been offered "financial inducements" to remove customer records and violate employment agreements. SEC Chairman Arthur Levitt Jr. has been critical of these recruitment deals, and has urged disclosure. The NASD in October asked for comment on a rule that would require disclosure of accelerated payouts (see October 1999 RR, Page 32).
Neither Bass nor Merrill would comment.