To All MER brokers who signed their book away
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August 18, 2008 After losing costly battles with three former brokers last month, Banc of America Investment Services Inc. is now on the hook for $1.63 million.
Late last month, two brokers won an arbitration claim after alleging that the broker-dealer sullied their reputations and potentially damaged their future relationships with clients.
Both brokers, Rock Mirich and Brent Cowin, are based in Las Vegas. They left Banc of America Investment Services in October 2004 to affiliate with Commonwealth Financial Network of Waltham, Mass.
And on July 3, Banc of America Investment Services lost an arbitration claim worth $429,000 to an ex-broker, Jon Nee, who charged that the firm libeled him on his U-5 termination form.
"I've sued this bank dozens of times for various reasons. I have a non-positive view of Bank of America and how they treat people," said William K. Diehl, an attorney in Charlotte, N.C., who represented Mr. Nee.
"Hopefully, [Mr. Nee] can go forward and not have this blot on his record," Mr. Diehl said. In August 2006, Mr. Nee began working in Charlotte for Stanford Group Co. of Houston.
Shirley Norton, a spokeswoman for Bank of America, said that the issues are quite different in the two arbitrations, one in Las Vegas and the other in Charlotte. "[All three] brokers received awards in amounts far less than they demanded and won only on a limited number of their claims," she wrote in an e-mail.
"In fact, in the [Las Vegas] matter, the bank won on all counts except for one, and the bank intends to seek a review of that award through the filing of a Nevada state court action," Ms. Norton wrote.
Banc of America Investment Services, a subsidiary of Bank of America Corp. of Charlotte, has a recent history of arbitration tussles with ex-brokers.
In September 2006, it lost a $1.6 million arbitration claim to disgruntled former brokers who claimed that the firm had failed to deliver on various promises, including a platform that rivaled the wirehouses and an initial $25 million book of business.
At that time, several other former brokers and advisers were in the middle of arbitration claims and lawsuits against the firm.
In the award to Mr. Mirich and Mr. Cowin, the arbitrators ordered the erasing of language of a "defamatory nature" on the brokers' U-5s.
The three-person Financial Industry Regulatory Authority Inc. panel ordered Banc of America Investment Services to pay Mr. Mirich $800,000 and Mr. Cowin $400,000.
The panel of New York- and Washington-based Finra also ordered three executives with the firm to pay the brokers awards of $5,000 to $10,000, respectively.
Among other claims, the brokers alleged that Banc of America Investment Services and certain executives intentionally interfered with prospective business relationships, libeled and slandered them, and wrongfully fired them.
Mr. Mirich was Banc of America Investment Services' top producer in Nevada and was consistently among its top 10 nationwide, said Marie Mirch, the brokers' attorney, who is based in San Diego. He was "inexplicably terminated" by the firm in 2004 after building his book of business to over $300 million, she said.
In the award to Mr. Nee, Banc of America had to pay a commission of $73,000 and compensatory damages of $506,000. The panel ordered him to pay the firm $150,000, which represents the principal amount of a promissory note he received from Banc of America in February 2006.
Mr. Diehl, Mr. Nee's attorney, said that the dispute between Banc of America Investment Services and Mr. Nee began over the informal giving of gifts between the broker and his manager. The firm eventually said that Mr. Nee violated gift-giving policies, though he said he was unaware that he had broken any rules.
He wanted the firm to change his U-5, which stated that he was fired for an ethics code violation.
That entry blocked Mr. Nee from getting a job with other firms with which he was interviewing, Mr. Diehl said.
The arbitrators said the language concerning Mr. Nee's termination should be changed to a "dispute regarding internal gift giving," according to the award.
E-mail Bruce Kelly at [email protected].
So what you are saying is suing BofA makes sense cause you will get a windfall?
I believe what he is alluding to, Mr. Nestegg, is that BAISI will do whatever it takes to retain the assets they paid for (upfront money used to acquire new advisors be it from ML or not). The associated article basically illustrates the ridiculous lengths that the bank will go to (legal or illegal) to keep the accounts. The key point is that even though they will particpate in the protocol, those assets will remain. You can switch b/ds but you can’t take the clients without a fight. They will tap into the TARP fund just to pay lawyers to prove it.
And I am fighting an endless war... I should've retained Mr. Diehl. F*%&k.I’ve said ML handled this whole thing very poorly. So I agree I’m very concerned about BAC. Having said that, with protocol prevailing, I’m not sure what BAC could do if you left after you got paid. These firms now realize you better not screw with our U4s without serious documentation. Also, if they adjust your U4 after you leave you would think that looks bad on their part.
But this we know. By April or so someone who signed will leave and we will fnd out for sure.
My hunch is BAC will cut expenses to the bone and more FAs will leave. Most $1mm producers will stay but the middle of the lineup will flee.
I absolutely LOVE the fact that the once proud Merrill Lynch herd is now reduced to...................................................
THE WALMART OF BROKERAGE FIRMS. LOL!@#@I know some banker in Premier Banking that wanted to quit and go to another bank. When their managers took their resignations, they reported it up that they were fired for this or that. One banker had his offer at the new bank rescinded because when they went to check his story that he resigned, the official line was that he was fired.
On the BAI side, there aloso was a team which was reported in Investor News (I think) a couple of years ago that won on the same grounds - that BAI promised the moon and failed to deliver. I think they were in FL somewhere.Mucho...
You are correct in your analysis. BAISI is buying assets. They know many brokers will come over with naivete and ignorance. They are in for a shock and a bureacratic grind that will interfer with anyones basic notion of how to create revenue. They will then decide nothing that was promised has materialized, they will be angry for good reason, and then they will leave and pay back their upfront and think they have satisfied the "Protocol".....
W R O N G..... A thousand times wrong. This is what the MER brokers are completely clueless about and are now in a BEAR trap. BAISI will go to war to keep the valuable assets they believe they acquired when the bought MER. They dont see you as irreplaceable. Just the opposite. They will attempt to bleed you out over the course of a few years because you will still have to hire an attorney to defend yourself against their legal moves. They will also create doubt in your clients minds. Afterall, you just told you clients how good this was going to be and that there was not going to be any changes that would affect your relationship with them. You are now stronger with the "Biggest bank" etc, etc. Now that will be your noose, when you leave that BAISI will turn against you. The time to leave is before you sign to stay on. Not after. If you lose your case and have to pay them and dont have the money, FINRA will suspend your license until you pay up. And BAISI doesnt have to grant you an extended payment plan. 30 days is standard when an arb decision is reached. Good luck if you are battling them.bank of amigo:
That team was from MER in Cleveland and was wooed to San Diego. They won $3M and I am not sure they have even collected yet after 4 years, due to appeals etc. These victorious broker cases are the exception to the rule as about 95% of these cases go the other way in BAISI favor. Why...because BAISI and most other banks will not put anything in writing about the promises made for inherited assets or dedicated referral relationships, or assigned branches. This stacks the deck way in their favor because it becomes a "he said she said" dispute, then BAISI produces the only written evidence which is the agreement you signed. When weighed against your truthful but strictly verbal repsonse to your being deceived or fraudulently recruited, your case is reduced to a mere allogation or disgruntaled complaint in so far as the average arb panel is concerned. Their view is you signed an agreement, your an adult, and now its not working out for you for whatever reason that cannot be definitively determined. In the panels view you should have been more careful about the agreement you signed, cause now it is enforceable. The panel usually goes with the hard evidence which is the written employment agreement. BAISI is a pro at this and they have this down to a strict science. The whole process is a money maker for them or they would not continue to use these tactics. When they win 90% of the time they get your book for free. This is how they will clean out MER advisors who think they are bigger than BAISI. Good luck to allDaytradah, you make one great point. FAs should not be “selling” the new MER/BofA company. They should be only selling themselves.
I am averaging 3 client appointments a day. I close my meetings by talking to my clients about the merger. "I don't know if this is going to be a good thing or not. But if I think the firm is not going to be in your best interest, I will leave and go to another firm" At this point, the client usually blurts out "we will go with you wherever you go". I am preparing for the worst outcome.check out the finra site for closed abitration cases, in most cases you see where BAC won the case if a promissary note was involved. The FA got hosed with paying the promissary note plus all legal fees. There were some cases lost where I just winced had how ugle it turned out for the FA. Been there done that with my attorney.
Phan2om:
I think that is the right approach. All I can say is prepare for an extended 2 to 3 year legal war and you will have the right mindset and expectations. The arb process, based on the FINRA website and case summaries, is slow and grinding and not very aggressive about enforcing discovery or anything else until there has been an extended back and forth of multiple request for information, etc. Its like pushing on a rope for 18 months and then the panel gets serious after they realize neither party is trying to find a solution prior to the deadline for getting in front of a panel in a formal decision. Most brokers wilt, panic, or are starved out of the protracted process. New employers dont like it either because it takes its toll on your production and your patience and attitude and potentially your marriage.It is serious stuff.
I know of multi million dollar producers who got caught in this net and are 1/4 to 1/2 of what they were before the nightmare.