BAC NASD Arb Story

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Oct 23, 2006 9:15 am

in today's issue of Investment News (by Bruce Kelly) which may interest wirehouse brokers. It's about some Merrill guys who didn't get what they were promised. They won in arbitration ($3 million) recently.

Oct 23, 2006 7:48 pm

It's one thing to move to a different firm, but to change firms AND move across country (as a team) is taking some pretty big risks. They must have been promised the moon, to make the move.

Oct 23, 2006 8:21 pm

A little birdie here in SD told me that the book that they were expecting to bring over was dramatically higher than the reality of what they were able to move...


I agree with DOB- it was a big risk to switch coasts in the primetime of their careers... If they wanted the West Coast so bad they should have all chipped in to buy a house where they could've taken turns vacationing...

Oct 24, 2006 2:43 am

Or they should have cut a deal with former equity trader, Bobby McCann, to work out of a Mother MERrill Orange County, CA office during the winter months.



Oct 24, 2006 8:02 am

what's the story?

Oct 24, 2006 9:35 am
ymh_ymh_ymh:

Or they should have cut a deal with former equity trader, Bobby McCann, to work out of a Mother MERrill Orange County, CA office during the winter months.





With 20/20 hindsight, not a bad plan. OTOH, they wouldn't have picked up the $1.4MM they got to come over, the promised BAC book and who knows what they might have lost of their old book.


It's good to see BAC (or anyone else who plays bait and switch) get pounded for fraud.

Oct 24, 2006 11:55 am

3 Merrill brokers from the frozen tundra wanted to relocate to warmer digs (Orange County, CA) so BAC in San Diego made them an offer they couldn't refuse. Things didn't work out. 2 are with Wells Fargo now.


Someone posted an article about it yesterday from Investment News.


I am glad to see BAC get spanked for bait and switch, too.

Oct 24, 2006 7:15 pm

Registered Rep is kidding themselves by booting my link the other day if they think they are "competition" with the Investment News and that was reason to boot the post.


RR is an advertising sponsored trade magazine and very different than Investment News which is closer to real newspaper. I'm not saying each doesn't have a purpose but they aren't the same at all. 



ymh_ymh_ymh:

3 Merrill brokers from the frozen tundra wanted to relocate to warmer digs (Orange County, CA) so BAC in San Diego made them an offer they couldn't refuse. Things didn't work out. 2 are with Wells Fargo now.


Someone posted an article about it yesterday from Investment News.


I am glad to see BAC get spanked for bait and switch, too.

Oct 24, 2006 7:25 pm

I think lying to producers is the great fertile ground to be explored in the soon coming future. If you miss on disclosure agreement to a client you can face lawyers, if an AG find one undisclosed fee on a products the Spitzer machine goes into high gear and it all trickles down to clients and producers to pay.


On the other hand managers lie and cheat on agreements to producers all the time. Banks are a huge target. The pattern is always the same; the growth phase when the promises are made, the critical mass where the promises stop and get redefined and then the cheating phase when the promises get broken and producers have to make hard choices and face losses when changing. The whole time the people in management defame the production element to retain or gain business.


Another reason brokers should have independent licenses and account control similar to the 1940 Act. The 33' "rep" concept is the real reason this all goes on, it should be scraped.





Oct 24, 2006 8:15 pm

I know a guy who transferred from the Savannah branch to the Podunk branch, a couple hundred miles away, all in-state and within the same firm - his book intact.


Six months later, he switched firms, but stayed in the same city. Since almost all of his book was from coastal Georgia, few of the brokers he left behind could snatch his accounts. Book still intact.


The moral of the story? If you're a broker who wants to move a considerable distance from an area that is home to most/all of your accounts, simply stay with the same firm and transfer to another branch office. (The brokers from your old office are prevented from mooching on your accounts.) Stay there until the dust settles, then make your move to your B/D of choice. The chance of brokers, from your old B/D, mooching the accounts of your clients who live a good distance away, are slim.


Don't get me wrong, the guy is a good broker. I'm just amazed at how much of his original book he was able to retain, with his recent moves.  

Oct 24, 2006 8:54 pm

DOB,


That post was probably one of the 10 best I have read on this forum. Great advice right there...

Oct 25, 2006 12:31 am

I know an ex PRU guy who did that. He moved from Manhattan (Park Avenue office) to Glastonbury, CT with PRU/WB. About 8 months later he accepted a nice upfront offer from StanLEH Morgan. He managed to get 78% of his book/clients to go with him.


I didn't post the link as I figured it would get removed. Anyone who wants to read it can go to Investment News' website and do so.


Good advice Doberman---make the BIG move with the same firm then jump ship 6 months later.


Oct 25, 2006 2:24 am
doberman:

I know a guy who transferred from the Savannah branch to the Podunk branch, a couple hundred miles away, all in-state and within the same firm - his book intact.


Six months later, he switched firms, but stayed in the same city. Since almost all of his book was from coastal Georgia, few of the brokers he left behind could snatch his accounts. Book still intact.


The moral of the story? If you're a broker who wants to move a considerable distance from an area that is home to most/all of your accounts, simply stay with the same firm and transfer to another branch office. (The brokers from your old office are prevented from mooching on your accounts.) Stay there until the dust settles, then make your move to your B/D of choice. The chance of brokers, from your old B/D, mooching the accounts of your clients who live a good distance away, are slim.


Don't get me wrong, the guy is a good broker. I'm just amazed at how much of his original book he was able to retain, with his recent moves.  



Sound practical logic, not always found on this board. A key thing in the text; "guy is a good broker". That helps.


My point is about the BOA story is that you could be a "good" anything and if senior people lie and manipulate, sometimes in the most minor ways or major ways you suffer and there is little recourse other than courts. The NASDR? 95% on the side of culprits if they work in management and claim it doesn't impact the public. Meanwhile any client related issues gets pushed down to the "rep" to show management is "protecting" the public. Even an unsustantiated "letter" can cause a huge issue to a producer from a client. Meanwhile thousands of routine trade lies are the custom to producers from firms. The basic culture of the industry between producers and management is sub-professional and has plenty to do with the abuses clients experience. As long as there is immunity for management lying in the NASDR system to brokers the sector will continue to decline.


Somewhere near you is an RIA with a marketing model that includes a description of how sleazy and dishonest the NASD system is to gain market share and it's partly accurate. The BOA was a breath of fresh air and should be celebrated on this forum. This is an area that needs the most reform and focus but the power structure will always be focused on dividing producers and clients to justify and enhance management/firm interests.





Oct 25, 2006 7:18 am

The problem with the NASD arbitration system and the NYSE one for that matter is the "quality" of arbitrators (mostly over the hill "has been" washed up half senile securities lawyers who couldn't and didn't make it to senior partner at a respectable firm). They're a bunch of "wanna be" judges.


The reason the NASD/NYSE can't get good ones in their prime is the compensation which is intentionally too low to guarantee biased judgments in favor of the broker-dealer and against the broker and/or retail client.

Oct 25, 2006 8:11 am

That judgement makes me want to take my bonus and go indy NOW! Lots of broken promises at BAC.

Oct 25, 2006 8:27 am

Yep, and BAC's not the only one to "stick" it to producers, either.


Did you read Bruce Kelly's story?

Oct 25, 2006 9:16 am
ymh_ymh_ymh:

Yep, and BAC's not the only one to "stick" it to producers, either.


Did you read Bruce Kelly's story?



That bias is generally baked into the employee-advisor model, as Seeker15 has pointed out.  So, it happens in many firms.

Oct 25, 2006 12:54 pm
joedabrkr:
ymh_ymh_ymh:

Yep, and BAC's not the only one to "stick" it to producers, either.


Did you read Bruce Kelly's story?




That bias is generally baked into the employee-advisor model, as Seeker15 has pointed out.  So, it happens in many firms.


That was civil Joe, I'll take it as a complement.


People who pay all their own expenses shouldn't be trapped in "employment" status based on the twisted compliance scheme from 1933.


The way to improve the sector is eliminate firm supervision of "reps" and go to an individual license system. Firms can provide support but they shouldn't have the exclusive over account custodity which is the central rule abuse driving most issues for advisors. When dealers are forced to really compete for free advisors and producers can control account location the old game will and should be gone. Lying to producers, and thereby the public, will be greatly reduced. It relates directly to the BOA abuse. Doctors at a hospital would never let this sort of thing happen to them.



Oct 25, 2006 1:40 pm
ymh_ymh_ymh:

Yep, and BAC's not the only one to "stick" it to producers, either.


Did you read Bruce Kelly's story?




You mean his BAC story?

Oct 25, 2006 1:42 pm
ymh_ymh_ymh:

...to guarantee biased judgments in favor of the broker-dealer and against the broker and/or retail client.



Interesting perspective. From where I sit the retail client has a huge advantage, then the firm. The only person almost 100% assured of losing is the rep.