When a Contract Is Not a Contract

Mark Thierman is at it again. We always thought he was a clever labor lawyer when we first spoke to him back in the spring of 2006, when we got word that he had dusted off some old Depression-era law to force brokerages to pay their reps overtime and not just commission. (In fact, Thierman, of Reno, Nevada, was our cover boy back in May 2006, when he reckoned Wall Street was violating the Fair Labor

Mark Thierman is at it again. We always thought he was a clever labor lawyer when we first spoke to him back in the spring of 2006, when we got word that he had dusted off some old Depression-era law to force brokerages to pay their reps overtime and not just commission.

(In fact, Thierman, of Reno, Nevada, was our cover boy back in May 2006, when he reckoned Wall Street was violating the Fair Labor Standards Act of 1938, which protects non-white-collar employees from being worked to the bone. And you thought you financial advisor types were professionals. Thierman argued in a class action suit that registered reps are more akin to simple salesmen following orders rather than professionals using their own judgment and, therefore, not exempt from the FLSA. Brokerages began settling a few years ago; a case against UBS in California is still pending. For more, visit our website and search Thierman's name.)

Now, Thierman argues, in another class action suit, that, because firms “may terminate the employment and accelerate the note [or sign-on “bonus”] at will, with no loss to itself, with or without prior notice, this is an illusory contract, with lack of mutuality and lacking any consideration for the executory portion of what is essentially a unilateral contract. The employee, on the other hand, must pay an accelerated note with accumulated interest if he or she decides to terminate employment with Defendant [firm].” In other words, the acceleration and interest clauses are “unconscionable,” one-sided and unfair to one party — and therefore unenforceable. For more on this interesting case, please turn to Staff Writer Halah Touryalai's article on page 24.

The registered investment advisory channel has long been touted as the Next Big Thing. It has been described this way for years now. With the financial meltdown that caused big Wall Street firms to die or get saved, you'd have thought you'd begin to see that migration — the migration of sophisticated advisors from wirehouse to RIA — kick into high gear. We continually report on the movement, of course. Last month we noted that RIAs (and regional broker/dealers) have been gaining market share at the expense of wirehouse firms. It's true that RIAs only control about 11 or so percent of the wealth management industry's client assets (to wirehouses' 40 percent). But RIA firms are on the acquisition path, wooing sophisticated (that is to say, large) advisors and advisor teams. Last year, the big RIA custodians say they won 311 advisor teams worth about $24 billion. That trend seems like it will continue, especially now that RIAs are on the hunt — and not just for the $100-million-and-up FA. Please turn to Senior Editor John Churchill's article on page 31 for details.

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