In the Chinese calendar, 2002 was the Year of the Black Horse. For stockbrokers, 2002 is the Year to Forget.
On the business side, the problems have been plentiful. The relentless stock market slide has caused broker incomes to plummet, client dissatisfaction to soar and firm cost-cutting to accelerate. Many brokers feel squeezed from all sides. Just a couple of years ago, an unhappy but productive broker could move easily to another firm. It is not so easy today.
Managers and staff have not had it any easier. Many firms are consolidating small offices to reduce overhead, thereby reducing the number of managers. Even where branches are not consolidated, the firms have cut back on support staff.
On the legal side, the picture has not been pretty either. Many firms have fired brokers for inadequate production, particularly when the broker joined the firm recently and received upfront money based on historical production. A letter from the firm demanding repayment is often in the mail days after the broker is fired.
If history is any guide, however, business will turn around. (I know: That's the same thing everyone was saying in December 2001. But this time could be different.)
One way or the other, now is the time to prepare for 2003, the Year of the Sheep. While everyone's situation is different, here are some general suggestions with regard to the legal aspects of your career.
Take a Legal Inventory
It never ceases to amaze me how many brokers have no idea what documents they have signed that could affect their careers.
Since the phone is not exactly ringing off the hook with trading activity, take the time now to comb through your files to find copies of your promissory notes, forgivable loan documents, nonsolicitation agreements, noncompetition agreements and the like. Look for copies of letters or notes of conversations when you were hired to document the promises made to you. Check out the provisions of your firm's employee handbook.
Review Career Options
The bull market of the late 1990s made everyone a temporary investment genius, and many brokers temporary big producers. If the bear market has made you feel that you only did well earlier because it was so easy and this business is not really for you, consult a career counselor or otherwise seek out alternatives before the firm makes the choice for you.
Armed with the legal inventory mentioned above, you can consult a lawyer on your personal situation to learn how the documents you have signed may affect your career options.
Check Out Your CRD
If you do decide to move within the industry, even to a mutual fund distributor or other non-production job, the information on your Central Registration Depository record is critical.
The easiest step is to check out the “public disclosure” section of the NASD Web site (www.nasdr.com). These public disclosure reports, however, are not complete. To see a more comprehensive picture, you can obtain a copy of your full CRD printout by sending a written request to the NASD Office of General Counsel, NASD Regulation, 1735 K Street, N.W., Washington, D.C., 20006. Be sure to include your full name and CRD number, as well as your home address to which the report should be sent.
Be aware, however, that even a printout of your CRD from the NASD may not contain all the information about you in the NASD's computer system. Recent reports indicate that firms are permitted to put entries under the “registration comments” section of the CRD computer system. When making your request, include a request for copies of the registration comments entries.
If there are any inaccurate entries on the CRD system, now is the time to try to fix the problem, or at least think about how to explain the entries. Do not wait until you are in a job interview to figure out how to handle your CRD entries.
With some planning, 2003 should be more memorable than 2002.
William A. Jacobson is an attorney in Providence, R.I., and represents securities industry employees in employment disputes.