Witholding Commissions

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Jan 19, 2006 8:33 am

By bank requires any customer who purchases a mutual fund to initial in
many places and sign an acknowledgement for each fund they purchase.
For one customer, there was one area that was not initialed. The
customer received her prospectus and did indicate in that area on the
form of such. The bank is holding back my commissions because the
acknowledgement forms are not completely "perfect". The problem is, the
client is out of the country for a couple of months. The bank got paid
by the fund family. Are they allowed to hold back my commission because
of this imperfect paperwork? And if so, how long can they hold it back?

Jan 19, 2006 8:45 am

Yep. If missing initials triggered the hold, then, I suppose, getting the initials will trigger the release.


Banks are great.

Jan 19, 2006 9:21 am

Umm you need to find another bank to work for.  That is utter nonsense.  The purchase should not have gone through PERIOD.  My company would've held up the sale until the client got back into the country got the sig THEN make the trade.  You sound like a good person and you really need to find someplace else that will make you feel good about your ethics.


Why are you afraid of going indy?  You need the insurance, or guaranteed pay?  Whatever the reason.  You may feel secure now but when a client starts throwing accusations of foul play the bank will drop you like a hotcake.  Don't believe me?  I read an article in RegRep where ML let two of their brokers go due to the Enron deal.  Get out now on your terms or get out on their terms with a possible blemish on your U4

Jan 19, 2006 9:28 am
TimBo:

Umm you need to find another bank to work for.  That is utter nonsense.  The purchase should not have gone through PERIOD.  My company would've held up the sale until the client got back into the country got the sig THEN make the trade.  You sound like a good person and you really need to find someplace else that will make you feel good about your ethics.


Why are you afraid of going indy?  You need the insurance, or guaranteed pay?  Whatever the reason.  You may feel secure now but when a client starts throwing accusations of foul play the bank will drop you like a hotcake.  Don't believe me?  I read an article in RegRep where ML let two of their brokers go due to the Enron deal.  Get out now on your terms or get out on their terms with a possible blemish on your U4



Yeah! And divorce your wife, while you're at it!

Jan 19, 2006 9:45 am

I saw earlier in a post where you are accused of not adding anything of value.  Now you are proving them to be correct.  Are you like a professional troll? (rhetorical question)

Jan 19, 2006 10:49 am

First of all the traditional disclaimer.  I am not an attorney and you should consult one if you are concerned about these issues. My observations are not to construed as legal advice


Topbrkr....do you work for the bank as a direct employee or do you work for the B/D?   I used to be a bank broker ...a long time ago... so things may have changed, but your two posts are making the alarm bells go off for me.  At one time I was a bank employee where my commissions were assigned to the bank and I was given a salary and percentage of commissions earned.  Later the bank spun me off to be an employee of the B/D and my commissions came directly from them with no Bank salary.   In neither case was I as restricted as you seem to be.


If the B/D is your employer you need to contact them and in writing explain your concerns about the limited products that you are being allowed to offer.  The B/D may be alarmed by this inappropriate business being done in their name.  You might want to do this in any case, since EDJ and others have been bitch slapped over having "preferred" funds without the proper disclosure, your B/D may not know how the Bank is controlling your business and they may be concerned about this. Possibly it is just one manager who is controlling this and the admistration of the bank is not aware of the liablity that they are incurring by allowing him to act this way.  Generally Bank administrators are dumber than a box of rocks when it comes to the securities business.  As long as the manger is bringing in the bucks to the bottom line they are perfectly happy.


The acknowledgement form that you mention sounds like one that the Bank itself has come up with to cover itself and may have nothing to do with the Broker Dealer at all.  Whether they can withhold your commissions is questionable since they have been paid by the mutual fund company already.   When I was in the first position, as a Bank employee I had to spend a lot of time tracking my sales and commissions to make sure I got properly paid since the manager of the Bank program was conveniently posting my trades as his.  (Yet another reason to be independent or with a reputable firm)


Depending on how long you have been in the business and how tight you are with your clients, you may want to seriously consider moving either to another firm or going Indy at some point if you can't resolve your problems with the Bank. 

Jan 19, 2006 11:13 pm

The Bank has its own B/D. It is part of the bank. The B/D uses a major
clearing firm. Does the clearing firm have any liablilty? The bank is
privately owned. Their website has an "ethics hotline". However, since
they monitor my web surfing and E-Mails, they (my manager and the B/D)
would know that I surfed to that ethics site. I don't really know to
what extent the owners of the bank are aware of the improprieties going
on at the B/D division. They may not be aware... Or, they may be
completely aware. It seems my only option is to anonomisly complain at
the NASD. But, when they come snooping, I would guess my district
manager may suspect I was behind the complaint..Is there a
"whistleblower" law that would cover my butt??

Jan 19, 2006 11:25 pm

I had to deal with this with a previous job annoying, it is there way of making sure you complete the paperwork in a timely fashion.

Jan 20, 2006 9:00 am

These two articles refer to forgeries. My case refers to my B/D
witholding commissions which they received because a mutual fund
purchase acknowledgement form was not 100% perfectly filled out. If I
can't get ahold of this customer because she is out of the country,
shouldn't the bank either A) Give me the commission. Or B) Kill the
sale?

Jan 21, 2006 12:01 am

I would send an email to my manager, compliance officer and the department that let the sale go through. Being proactive will put you in a better light and your manager will know not to mess with you.  Put them in the hotseat.  This is called CYA (papertrail).  You would put something in there like, I'm concerned that this sale went through without my clients proper initials in all places as required by company rules.  Don't just keep in your sent file print immediately.  If you receive a response print that immediately as well and take it home to file.


Don't put anything in there about comission because if seen later (by lawyers) the argument will be that you were not putting the client first.


my 2cents

Jan 21, 2006 9:44 am

So if you listen to timbo and they bust the trade the client will be pissed off.  Figure out how to get ahold of the client and send them the forms fedex.  If you can't get ahold of the client think of it as deferred comp. it is only one trade... It will teach you to double check forms and triple check them before the client leaves your office.

Jan 21, 2006 11:49 am

OK....this just struck me and I can't believe nobody else has suggested it....


You know, it is quite possible these days to call someone overseas with out too much trouble or expense.  Too, UPS, DHL, and FEDEX offer overnight delivery to most parts of the world.  It's a little more costly than domestic, but hopefully a very small amount compared to your pending commission payment.


Is there some way you can get a message to your client, find out where he might be staying for at least a few nights, and then you can express mail the incompleted forms for him to finish off?  Hell you can include a return envelope and even a pen in the stupid packet just to make it easy.


If your b/d is withholding the commish, you can probably point out to them that they've been paid and put themselves in a ticklish position by not paying you, and convince them to pay for the costs of the overnights.


Just an idea...

Jan 21, 2006 5:30 pm

"Frankly, it's a bit silly to suggest that the firm break the trade because the form wasn't fully completed --- which, to be honest, was your responsibility --- and, yes, even if it was an oversight, the buck has to stop with you."


You call yourself a lawyer?  No, why should they hold his payout up to higher standards for payout than themselves for placing a trade.  Listen to how this sounds "because the from wasn't fully completed".  I have had business rejected for just that.  My company wont place the trade therefore I don't get commission until that paperwork is filled out COMPLETELY AND CORRECTLY.  Do you ever deal with a compliance officer?  I highly doubt it.


The buck stops with him when the client comes back and changes thier mind.  "Mr. client I forgot to get your signature here"- "but, my trade went through"- "um yes I know but I can't get paid until you initial here" "but the company has my money and changed it into funds" "I'm sorry"


Yeah, I'd have my compliance officer and manager in on that meeting.  By placing that trade the company is WRONG.  If the client says they change their mind then who has to cover the costs?  The broker?  Because he forgot an initial but still didn't get paid?


You are silly.  I'd never hire you as a lawyer.  Plan and Simple Business Law 101 

Jan 21, 2006 6:05 pm
TimBo:

"Frankly, it's a bit silly to suggest that the firm break the trade because the form wasn't fully completed --- which, to be honest, was your responsibility --- and, yes, even if it was an oversight, the buck has to stop with you."


You call yourself a lawyer?  No, why should they hold his payout up to higher standards for payout than themselves for placing a trade.  Listen to how this sounds "because the from wasn't fully completed".  I have had business rejected for just that.  My company wont place the trade therefore I don't get commission until that paperwork is filled out COMPLETELY AND CORRECTLY.  Do you ever deal with a compliance officer?  I highly doubt it.


The buck stops with him when the client comes back and changes thier mind.  "Mr. client I forgot to get your signature here"- "but, my trade went through"- "um yes I know but I can't get paid until you initial here" "but the company has my money and changed it into funds" "I'm sorry"


Yeah, I'd have my compliance officer and manager in on that meeting.  By placing that trade the company is WRONG.  If the client says they change their mind then who has to cover the costs?  The broker?  Because he forgot an initial but still didn't get paid?


You are silly.  I'd never hire you as a lawyer.  Plan and Simple Business Law 101 



Actually Tim I think you're wrong on this one.  The additional paperwork far exceeds industry and regulatory standards for an acceptable mutual fund order.  Too, the firm(bank) did not quickly refuse the order and contact the client to inform him as such, so they client is operating under the(correct) assumption that his order has been executed.


The b/d has put themselves in a very ticklish position by requiring additional non-standard paperwork, and not rejecting the trade immediately(and letting the client know) when the paperwork was not complete.  As my old compliance officer used to say-they've given this client a 'free put option' such that if the investment is down considerably when he is asked to sign the additional paperwork he could refuse, and most likely ask that the trade be busted out.


Most likely, at that point, the b/d will comply with the request and try to charge the broker back for any market loss.  However, that would hardly be fair considering that they held up the trade for additional paperwork and did not pay out the comission.  Once again, they created a real mess here by not reacting in a timely enough manner-like on t+1 or 2- to inform the adviser/client of the additional requirements before the client left town.


A real mess.  I would want the branch manager or compliance officer in the meeting because I would expect them to explain the mess and furthermore expect them to be responsible if the trade was to be broken.  Ultimately could have saved all this trouble if the advisor got the initials in the box, but paperwork is so complicated these days boxes get missed all the time.

Jan 22, 2006 12:25 pm
joedabrkr:
TimBo:

Yeah, I'd have my compliance officer and manager in on that meeting.  By placing that trade the company is WRONG.  If the client says they change their mind then who has to cover the costs?  The broker?  Because he forgot an initial but still didn't get paid?


You are silly.  I'd never hire you as a lawyer.  Plan and Simple Business Law 101 



Actually Tim I think you're wrong on this one.  The additional paperwork far exceeds industry and regulatory standards for an acceptable mutual fund order.  Too, the firm(bank) did not quickly refuse the order and contact the client to inform him as such, so they client is operating under the(correct) assumption that his order has been executed.


The b/d has put themselves in a very ticklish position by requiring additional non-standard paperwork, and not rejecting the trade immediately(and letting the client know) when the paperwork was not complete.  As my old compliance officer used to say-they've given this client a 'free put option' such that if the investment is down considerably when he is asked to sign the additional paperwork he could refuse, and most likely ask that the trade be busted out.


Most likely, at that point, the b/d will comply with the request and try to charge the broker back for any market loss.  However, that would hardly be fair considering that they held up the trade for additional paperwork and did not pay out the comission.  Once again, they created a real mess here by not reacting in a timely enough manner-like on t+1 or 2- to inform the adviser/client of the additional requirements before the client left town.


A real mess.  I would want the branch manager or compliance officer in the meeting because I would expect them to explain the mess and furthermore expect them to be responsible if the trade was to be broken.  Ultimately could have saved all this trouble if the advisor got the initials in the box, but paperwork is so complicated these days boxes get missed all the time.



Well you are agreeing with me on three points; 1. the branch manager and compliance officer should be in the meeting 2. the client has a "free put option" 3. I'd hate to be in that brokers shoes if the client reverses and the funds are down. 


My company has stop gaps in place where this would never have happened.  I get pee'd off when my paperwork comes back rejected due to lack of sig's but it is better for all in the long run.  I wasn't thinking that he gets the paperwork signed and then call in the trade, then hand in the paperwork.  We do paperwork-to compliance and B/D.  If something is out of line they will let me know and then I make corrections before making the trade.  If he doesn't have these stop gaps then follow my lead and have your compliance officer approve first.  I do this everytime I rollover an Annuity or Insurance with surrender charges.  It takes a little longer but when I come up on compliance radar I can say "you already approved that"


So yes he should be more careful and hopefully the client will be understanding.  If I were in his position I wouldn't be sweating the commission as much as I would be sweating how this whole thing plays out.


UPS- not a bad idea

Jan 22, 2006 12:54 pm

Exactly my opinion Timbo.  Yes ultimately the adviser should have had the paperwork filled out completely.  But, the firm has now created a big mess, first by having the supplemental paperwork in the first place, and second by not catching the error in a timely manner.

Jan 22, 2006 2:26 pm

It sounds to me as the paperwork in question has nothing to do with Wall Street, the NASD or the mutual fund company.  Having worked at a bank brokerage, I know that the bank will come up with their own paperwork that usually has the disclaimer that "it is not a bank product, not FDIC insured etc etc" .  That paperwork was soley to cover the Bank's butt incase the client lost money and would come back and claim that the Putnam Technology fund they bought was not explained to them to be different than a CD.  


Even if they did understand that they were buying an "investment" and not a bank guaranteed product, now the client will have red flags waved in their face by the additional documentation from the Bank.  A big lesson to be learned here is that no matter how dopey we think the paperwork may be......fill it out completley.  Nothing worse than raising questions about the transaction in th client's mind or looking like you are doing a half assed job in the first place.


I don't think the Bank can "break the trade" based on their own, home grown compliance paper work.  But again.....I'm not an attorney....just a lowly investment advisor

Jan 23, 2006 10:00 am

"Frankly, it's a bit silly to suggest that the firm break the trade because the form wasn't fully completed --- which, to be honest, was your responsibility


You don't realize that I was talking to joedabrkr.  Why do you continue to correspond?  Are your feelings hurt?  Get over it.


Any "lawyer" who says it is "SILLY" not to due something because of incomplete forms needs to be attacked if not altogether disbarred.

Jan 23, 2006 10:13 am
bankrep1:

So if you listen to timbo and they bust the trade the client will be pissed off.


I never wrote to have them bust the trade.  Maybe I didn't make myself clear enough.  Writing to the manager and compliance officer is to apprise them of the situation ONLY.  Please don't assume what I'm writing if you don't know or it's not clear to you ask me and I will clarify.