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On February 2, 2023, another former Credit Suisse investment adviser represented by Lax & Neville LLP won a FINRA arbitration award against Credit Suisse Securities (USA) LLC for unpaid deferred compensation.  See James D. Garrity v. Credit Suisse Securities (USA) LLC, FINRA No. 20-03957.  Lax & Neville has tried eight arbitrations resulting in awards of more than $32 million to 26 former Credit Suisse advisers.

The claimant, James Garrity, is now among the numerous former Credit Suisse advisors who have successfully brought claims for their portion of the over $200 million of deferred compensation that Credit Suisse refused to pay its advisors when it closed its US private bank in 2015, violating the advisers’ employment agreements and the firm’s own deferred compensation plans. Credit Suisse took the position, as it has with hundreds of other former investment advisers, that Mr. Garrity voluntarily resigned and forfeited his deferred compensation. A three-arbitrator panel awarded Mr. Garrity compensatory damages in the amount of $1,018,624.89 and prejudgment interest in the amount of $363,244.20. The Panel also ordered Credit Suisse to pay $51,000 in FINRA forum fees.

Lax & Neville LLP has won more than $32 million in compensatory damages, interest, costs, and attorneys’ fees on behalf of former Credit Suisse investment advisers. To discuss these FINRA arbitration Awards, please contact Barry R. Lax, Brian J. Neville, Sandra P. Lahens or Robert R. Miller at (212) 696-1999.

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On September 9, 2022, the Superior Court of the State of California entered judgment on a FINRA Arbitration Award against Credit Suisse Securities (USA) LLC, ordering it to pay more than $10 million to seven investment advisors formerly employed in the Los Angeles and San Francisco branches of its now-closed US private bank. This follows the July 8, 2022 decision of the Circuit Court of Cook County, Illinois confirming an award against Credit Suisse and entering a $9.5 million judgment for eight advisors in Chicago.

These fifteen advisors are among the more than three hundred Credit Suisse laid off when it closed its US private bank in 2015.  Credit Suisse purported to “cancel” the more than $200 million in earned and vested deferred compensation it owed its three hundred advisors by claiming each of them voluntarily resigned at the same time Credit Suisse was closing their branches and eliminating their positions.  The FINRA Panels in Los Angeles and Chicago, like eight other FINRA Panels thus far, unanimously found that Credit Suisse terminated the advisors without cause, breached their employment agreements, and violated their respective states’ labor laws, the California Labor Code (“CLC”) and Illinois Wage Payment and Collection Act (“IWPCA”).  The FINRA Panels ordered Credit Suisse to pay the deferred compensation, statutory interest and penalties, and a total of more than $2 million in attorneys’ fees and costs.

Credit Suisse subsequently petitioned to vacate the FINRA Panels’ Awards.  Among other grounds, Credit Suisse contended that the FINRA Panels exceeded their authority when they determined that Credit Suisse had violated the labor law and awarded statutory attorneys’ fees.  The California and Illinois Courts disagreed, denying the petitions to vacate in all respects and confirming the Awards, including the labor law violations and more than $2 million in attorneys’ fees and costs.

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Major bracket Wall Street banks have only recently institutionalized substantial retirement packages for senior advisors to sunset out with very few restrictions. Inheriting advisors who care to take over these books of businesses face an enormous opportunity to convert these books, yield a solid short-term return, and a terrific long-term opportunity to own and grow these books.

However, for these inheriting advisors, the rules associated with the restrictive covenants, the non-solicitation clauses, and the timeframe to yield any return differ substantially at Merrill’s CTP program from those at Morgan Stanley’s FAP program, Wells Fargo Summit Program, and UBS’s Alpha Program.

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The legal nuances behind making a move to a new firm partner intimidate many an advisor, but it’s time to move past that block. In this first episode in Advisor Talk’s Legal Perspective Series, Elite Consulting Partners CEO Frank LaRosa is joined by Brian Neville, Founding Partner of Lax & Neville, to provide insight and context to listeners as to best legal practices when making a transition.

In particular, this episode focuses on client solicitations when making a move. Topics covered by Frank and Brian include:

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Need legal tips for your financial advisor practice? Recent media coverage of an advisor’s transition from RBC to UBS and then back to RBC has shone a light on the legal missteps an advisor can make when moving their book of business to a new firm partner. In this episode, Elite Consulting Partners CEO Frank LaRosa is joined by Brian Neville, Founding Partner of Lax & Neville LLP, for a discussion that puts their substantial combined industry expertise to work and tackles the broad topic of the legal side of transitions, providing advisors with insights that prove practical and actionable.

Topics covered in the conversation include:

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Lax & Neville LLP has successfully brought claims on behalf of former Credit Suisse investment advisers for their portion of the over $200 million of deferred compensation that Credit Suisse refused to pay its advisors when it closed its US private bank in 2015, violating the advisers’ employment agreements and the firm’s own deferred compensation plans. Nine have gone to award thus far, including seven brought by Lax & Neville LLP totaling 172 hearing days and resulting in awards of more than $30 million to 25 former Credit Suisse advisers. See Prezzano et al. vs. Credit Suisse Securities (USA) LLC, FINRA No. 19-02974, Hutchinson et al. vs. Credit Suisse Securities (USA) LLC, FINRA No. 16-02825, Galli, et al. v. Credit Suisse Securities (USA) LLC, FINRA No. 17-01489; DellaRusso and Sullivan v. Credit Suisse Securities (USA) LLC, FINRA No. 17-01406; Lerner and Winderbaum v. Credit Suisse Securities (USA) LLC, FINRA No. 17-00057; Finn v. Credit Suisse Securities (USA) LLC, FINRA No. 17-01277; and Chilton v. Credit Suisse Securities (USA) LLC, FINRA No. 16-03065. All nine FINRA arbitration panels, three New York Supreme Court Commercial Division Judges (Credit Suisse Securities (USA) LLC v. Finn, Index No. 655870/2018 (N.Y. Sup. Ct. 2019); Lerner and Winderbaum v. Credit Suisse Securities (USA) LLC, Index No. 652771/2019 (N.Y. Sup. Ct.), Credit Suisse Securities (USA) LLC v. DellaRusso and Sullivan, Index No. 657268/2019 (N.Y. Sup. Ct.)), and a unanimous panel of the New York Appellate Division have found for the advisers and ordered Credit Suisse to pay the deferred compensation it owes them.

Lax & Neville LLP has won more than $30 million in compensatory damages, interest, costs, and attorneys’ fees on behalf of former Credit Suisse investment advisers. To discuss these FINRA arbitration Awards, please contact Barry R. Lax, Brian J. Neville, Sandra P. Lahens or Robert R. Miller at (212) 696-1999.

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On December 23, 2021, a team of seven former Credit Suisse investment advisers represented by Lax & Neville LLP won a $9.5 million FINRA arbitration award against Credit Suisse Securities (USA) LLC for unpaid deferred compensation. See Prezzano et al. vs. Credit Suisse Securities (USA) LLC, FINRA No. 19-02974. This comes just weeks after another FINRA Panel awarded $9 million to a team of eight former Credit Suisse investment advisers represented by Lax & Neville. See Hutchinson et al. vs. Credit Suisse Securities (USA) LLC, FINRA No. 16-02825.

These teams are now among the numerous former Credit Suisse advisors who have successfully brought claims for their portion of the over $200 million of deferred compensation that Credit Suisse refused to pay its advisors when it closed its US private bank in 2015, violating the advisers’ employment agreements and the firm’s own deferred compensation plans. The advisors were terminated without cause when the firm closed its US private bank. As it did with respect to almost every one of more than 300 advisers, and in each and every one of the deferred compensation cases filed against it, Credit Suisse took the position that the advisors voluntarily resigned and forfeited their earned deferred compensation when Credit Suisse closed their branches and eliminated their positions. The FINRA Panels unanimously found that Credit Suisse terminated each of the advisors without cause, breached their employment agreements, and violated their respective states’ labor laws.

Nine arbitrations have gone to award thus far, including seven brought by Lax & Neville LLP. See Prezzano et al. vs. Credit Suisse Securities (USA) LLC, FINRA No. 19-02974, Hutchinson et al. vs. Credit Suisse Securities (USA) LLC, FINRA No. 16-02825, Galli, et al. v. Credit Suisse Securities (USA) LLC, FINRA No. 17-01489; DellaRusso and Sullivan v. Credit Suisse Securities (USA) LLC, FINRA No. 17-01406; Lerner and Winderbaum v. Credit Suisse Securities (USA) LLC, FINRA No. 17-00057; Finn v. Credit Suisse Securities (USA) LLC, FINRA No. 17-01277; and Chilton v. Credit Suisse Securities (USA) LLC, FINRA No. 16-03065. All nine FINRA arbitration panels, three New York Supreme Court Commercial Division Judges (Credit Suisse Securities (USA) LLC v. Finn, Index No. 655870/2018 (N.Y. Sup. Ct. 2019); Lerner and Winderbaum v. Credit Suisse Securities (USA) LLC, Index No. 652771/2019 (N.Y. Sup. Ct.), Credit Suisse Securities (USA) LLC v. DellaRusso and Sullivan, Index No. 657268/2019 (N.Y. Sup. Ct.)), and a unanimous panel of the New York Appellate Division have found for the advisers and ordered Credit Suisse to pay the deferred compensation it owes them.

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On March 11, 2021, a FINRA arbitrator awarded expungement relief to George D. Ewins Jr. and Richard J. Kowalski, former Merrill Lynch financial advisors.  Ewins and Kowalski were represented by Robert J. Moses of Lax & Neville LLP.  Ewins and Kowalski sought expungement of a customer complaint from their registration records maintained by the Central Registration Depository (“CRD”).  CRD is the central licensing and registration system for the securities industry and its regulators, which contains information made available to the public via FINRA’s BrokerCheck. Pursuant to FINRA Rules 2080 and 13805, an arbitrator may grant an expungement of customer dispute information from a registered representative’s CRD record.  In the underlying arbitration filed by the customers, the customers alleged that Ewins, Kowalski, Merrill Lynch and Bank of America (“BOA”) sold Merrill Lynch proprietary volatility indices linked to structured notes known as Strategic Return Notes which were unsuitable in light of their investment objectives.  Merrill Lynch and Bank of America settled with the customers which resulted in the customers’ not having any out-of-pocket losses.  Ewins and Kowalski did not contribute to the settlement.

Pursuant to FINRA Rule 13805 of the FINRA Code of Arbitration Procedure (“Code”), the FINRA arbitrator in the expungement proceeding made the following FINRA Rule 2080 affirmative finding of fact: “[t]he claim, allegation, or information is false.”  According to the Award, the arbitrator reached this conclusion “based upon the fact that neither Ewins nor Kowalski was responsible for the failure of Merrill Lynch and BOA to make the requisite disclosures concerning the fixed costs associated with the Strategic Return Notes. Both Ewins and Kowalski testified credibly that they performed necessary due diligence before they recommended the Strategic Return Notes for the customers. There is no reason to conclude that either Ewins or Kowalski could have reasonably questioned the validity, accuracy and completeness of the Strategic Return Notes offering materials prior to the SEC and FINRA actions. One of the customers who filed the underlying arbitration submitted a detailed written response to Ewins and Kowalski’s request for expungement and testified at the expungement hearing that he “personally do[es] not have a problem with a potential expungement of the petitioner[s’] record[s] if they have met the burden for their record to be cleared,” and that he did not want Ewins and Kowalski to have adverse consequences from having the disclosures on their CRDs.

As noted by the arbitrator in the Award, Merrill Lynch agreed to pay a $10 million penalty to settle charges by the SEC that Merrill Lynch violated securities laws and was responsible for misleading statements in offering materials provided to retail investors for structured notes linked to a proprietary volatility index.  Merrill Lynch also agreed to a Letter of Acceptance, Waiver and Consent (“AWC”) with FINRA in connection with the same disclosure violations.

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