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Jan 27, 2009 5:28 pm

I have been at SB for 6 years. Is anyone else going crazy of the back end portion of your original recruit package?

 
My back end deal was all stock and although I pleaded for it to be in cash or something more diversified they wouldn't budge. So now my bonus that was earned 5 years ago is virtually gone.
 
Any other SB people concerned about this?
 
Now we are merging with MS and we are just supposed to ignore the fact that someone is not holding up their end of the deal we originally agreed to?
Jan 27, 2009 5:50 pm

in the same boat get my back end bonus in june all stock worthless.  I left morgan to come here now it looks like back again..it's like ground hog day.

Jan 27, 2009 5:58 pm

Take the stock, sell it, and go use the proceeds to buy one beer at the bar across the street.  If you're lucky you'll have enough to buy a second.  In all seriousness though I feel for you guys, that definately is getting the short end of the stick. 

Jan 27, 2009 6:18 pm

My situation is probably a bit worse than yours because I did also get cash in addition to stock. My promissory note involves a commitiment of seven years and if I leave before that term, I have to pay back a prorata amount of the note to the firm. If I leave now, I would owe them a significant amount ( which is long gone) and I would also be leaving with worthless stock. If I stay, I have to continue paying the income taxes annually on the promissory note and that's a good deal of money esepcially in view of decreased payouts.



Since we're both still on " retainer" we would be ineligible to receive any retention bonus that other SB brokers may get from the joint venture.



In a word, we're screwed -- and we're trapped. But I dont think that anyome who posts at this forum would be surprsed at the morality of it all -- or lack therof. You seem to think that there's some sort of inherent good faith that the company should exhibit. Being a veteran of the industry, I'm sure you know that there's no such thing.

Jan 27, 2009 6:50 pm

Actually I think they will be making an adjustment in the back end bonus. According to 2 attorneys.... the money was earned when you hit the mark. The fact they decided that investing it in stock was all to their advantage...not ours.

 
Other firms had historically paid back end bonuses as an additional FL with the clock starting when it was earned. I am guessing their will be remedy or a class action law suit. I say this only because I know there has to be a good number of people in our situation, and you aren't talking about small amounts of money.
 
We had no control how it was invested, in fact we were told that we were not allowed to hedge the bonus. I can understand accepting the fact that most of us lost a lot of money in the cap plan, we made those investment choices. The back end bonus that was earned 3, 4 ,or 5 years ago should have been protected.
Jan 27, 2009 6:57 pm

And BTW. There is discussion on brokers under contract still being eligble for at least a portion of the retention deal...but I doubt it will be much.

 
And another thing, I also got cash up front and I am paying taxes on it with one year left to be forgiven. But my payout has not gone down.
 
My back end bonus is a big number that I earned to move over 6 years ago, and I am not going to just accept a shrug of the shoulders from Citigroup.
Jan 27, 2009 7:28 pm
Squizz:

I have been at SB for 6 years. Is anyone else going crazy of the back end portion of your original recruit package?

 
My back end deal was all stock and although I pleaded for it to be in cash or something more diversified they wouldn't budge. So now my bonus that was earned 5 years ago is virtually gone.
 
Any other SB people concerned about this?
 
Now we are merging with MS and we are just supposed to ignore the fact that someone is not holding up their end of the deal we originally agreed to?




You agreed to join them, anyway, knowing that there was risk involved in ACCEPTING a stock deal on the back end. If the stock had tripled, would you force them to take the overage? Sucks to be you.

Jan 27, 2009 7:36 pm

Actually you would think that $500,000 invested by a bank for 6 years would grow a bit, so no to answer your question I wouldn't refund anything.

 
The point is, I have letters asking for it to be put in a money market account or to put a collar on it with the dividends covering the cost. This is NOT a stock investment I made...the firm did it...it was tax advantageous for them to do so. I earned the money...it's no different than your employer putting a large portion of your earnings or wages in an investment and having it go away...you wouldn't be happy.
 
What I expect is my bonus plus 6 years interest. Nothing more.
Jan 27, 2009 8:09 pm

How is your point different than a client claiming "how can you have let my account drop so much in value, you're the professional, you should have known when to get out, I would have made more on my own in CDs, I don't know how these things work, I thought you said there was no risk, yada yada....... all I want now is my money back plus 6 years interest"?

 
You presumably read the contract, and are presumably an investment professional.
 
Sorry, I'm with Hank. This entitlement thinking is yesterday's news.
Jan 27, 2009 8:35 pm

The difference is clients or the brokers could have moved their money somewhere else. Mine was frozen and couldn't be hedged.

 
Entitlement??? It's earned income.
 
Most of us also lost a few hundred thousand in the Citigroup Cap plan...definately our faults. We made that choice. The back end bonus we had no choice. Maybe there should have been 2 or 3 investment options...then there would not be an argument.
Jan 27, 2009 8:40 pm
Squizz:

The difference is clients or the brokers could have moved their money somewhere else. Mine was frozen and couldn't be hedged.

 
Entitlement??? It's earned income.
 
Most of us also lost a few hundred thousand in the Citigroup Cap plan...definately our faults. We made that choice. The back end bonus we had no choice. Maybe there should have been 2 or 3 investment options...then there would not be an argument.




You DID have a choice. You could have turned down the deal. They offered you SHARES of stock, not money. You accepted SHARES of stock. I don't see how you could be more naive.

Jan 27, 2009 8:51 pm

Agreed with the others.  You chose to accept a large check to affiliate as an employee with a large institution.  You further agreed to accept your back end payment in stock, knowing full well that there was risk that the stock could go down.

Jan 27, 2009 9:19 pm

I am not NAIVE...I am pissed   LOL... there is a difference 

 
Maybe I will just take 10,000 certificates, buy a bird and...well you know the rest.
 
 
It's amazing to me that I wasn't allowed to hedge it with options. When the stock was in the low 50's I was going crazy trying to get something done. Geez...hedge funds can do anything and us FA's have our hands tied behind our backs when it comes to our own money.
 
I know those of  us at SB aren't the only ones that have been destroyed, so this isn't a poor me post. But losing the kind of money that some of us lost in a stock we couldn't sell or hedge is painful for sure.
Jan 27, 2009 9:58 pm
Squizz:

I am not NAIVE...I am pissed   LOL... there is a difference 

 
Maybe I will just take 10,000 certificates, buy a bird and...well you know the rest.
 
 
It's amazing to me that I wasn't allowed to hedge it with options. When the stock was in the low 50's I was going crazy trying to get something done. Geez...hedge funds can do anything and us FA's have our hands tied behind our backs when it comes to our own money.
 
I know those of  us at SB aren't the only ones that have been destroyed, so this isn't a poor me post. But losing the kind of money that some of us lost in a stock we couldn't sell or hedge is painful for sure.





 
Could you not have bought put options in an outside account to hedge your stock position?
Jan 27, 2009 10:15 pm
Squizz:

I am not NAIVE...I am pissed   LOL... there is a difference 

 
Maybe I will just take 10,000 certificates, buy a bird and...well you know the rest.
 
 
It's amazing to me that I wasn't allowed to hedge it with options. When the stock was in the low 50's I was going crazy trying to get something done. Geez...hedge funds can do anything and us FA's have our hands tied behind our backs when it comes to our own money.
 
I know those of  us at SB aren't the only ones that have been destroyed, so this isn't a poor me post. But losing the kind of money that some of us lost in a stock we couldn't sell or hedge is painful for sure.



Nothing wrong with being pissed.

Jan 27, 2009 10:23 pm
Could you not have bought put options in an outside account to hedge your stock position?
 
 
No, you can't do that. It's not allowed...
 
Thats what I wanted to do, I got a letter from compliance flogging and quartering me for even asking.
Jan 27, 2009 11:36 pm

Methinks if you're looking for sympathy, you've come to the wrong place.  You agreed to take a large up-front check which, given how much you say your back-end is worth, is more than many people earn in a lifetime.  At the time it was likely unthinkable that Citigroup stock would now be changing hands with a 3 handle.

It wouldn't have been a perfect hedge by any means, but you could have sold short bank etf's, or starting a couple of years ago, gone long the SKF.  Live and learn, eh?  It is amazing to me, though, how many of us tell our clients not to have concentrated stock positions, then go out and do the same thing.  Between your employment at SB, your pension at SB, the matching contribution of your 401k in Citi stock (unless you go online and change it; it defaults to C), your back-end bonus, and your CAP participation--Godalmighty.  Hopefully you have a nice office.  Free coffee, stuff like that.

Jan 27, 2009 11:41 pm

Could you claim a taxable loss on the money?  Just asking.  It's likely to come up more and more.

Jan 27, 2009 11:51 pm
Bodysurf:

Could you claim a taxable loss on the money?  Just asking.  It's likely to come up more and more.



He hasn't received it, yet. When he does, it will be taxed as ordinary income. In other words, there is no loss. He's just not getting as much as he had hoped for. Effectively, the lost won't be taxed, as if it had been deducted.

Jan 28, 2009 12:45 am

BodySurf why in the heck would I short an index to hedge a large position in a stock? Thats nuts...and for 6 years? That would be really expensive tying up $500,000 for 6 years and/ or paying margin interest. You might want to rethink that statement.

 
Citi doesn't give stock in the pension or match the 401k with stock, in fact the pension they no longer contribute to and this year is the first year they matched 401k contributions for FA's since they stopped the whopping $1000 match 5 or 6 years ago. And Hank is correct, I haven't received the stock from the back end deal yet, I will when it vests next year and the tax won't be an issue.