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Notice to Credit Suisse Brokers That They May Have Claims Against Credit Suisse for Unpaid Deferred Compensation and That They Should Protect Themselves in their Upcoming Transition

On October 20, 2015, Credit Suisse Group AG (“Credit Suisse”) confirmed that it is closing its U.S. Domestic Private Banking business and announced that it was entering into an exclusive recruiting arrangement with Wells Fargo & Company (“Wells Fargo”) to provide Credit Suisse financial advisors and their clients in Credit Suisse’s U.S. Domestic Private Banking business an opportunity to transition to Wells Fargo’s brokerage business by early 2016.  Credit Suisse is now taking the unreasonable position that if a financial advisor does not accept employment with Wells Fargo, he or she will forfeit their deferred compensation, even though in most, if not all, instances the deferred compensation is paid to the financial advisor if he or she is terminated without cause.  Since Credit Suisse’s financial advisors’ termination is undoubtedly without cause as they are leaving the firm because Credit Suisse is closing its U.S. Domestic Private Banking business, Credit Suisse financial advisors will most likely have a claim against Credit Suisse for any unpaid deferred compensation.

The Credit Suisse Employment Dispute Resolution Program, which covers claims by an employee against Credit Suisse, does not permit employees to bring a class action suit for any claims relating to deferred compensation, and requires that the employee arbitrate the dispute before JAMS or the American Arbitration Association (AAA), private non-regulatory arbitration forums.  There is, however, an argument to challenge the alleged mandatory JAMS and AAA arbitration provision contained in the Credit Suisse Employment Disputes Resolution Program, as brokers who are registered with FINRA are required to arbitrate disputes, claims or controversies with a member firm at the Financial Industry Regulatory Authority, Inc. (FINRA), which is a different arbitration forum than the two selected by Credit Suisse.  In fact, there are many benefits for a financial advisor to have his or her claim arbitrated at FINRA as opposed to JAMS or AAA; namely, the FINRA arbitrator’s awards are publically available, the FINRA arbitrator’s disclosure requirements are more exhaustive, and the FINRA arbitrator’s ability to refer the matter to FINRA’s Department of Enforcement. Class action claims may not be arbitrated under the FINRA Code of Arbitration Procedure.  Further, the United States Court of Appeals for the Second Circuit in New York recently held that class action waivers, such as the provision contained in the Credit Suisse Employment Dispute Resolution Program, are enforceable.  Therefore, Credit Suisse financial advisors may only bring individual claims in arbitration against Credit Suisse for any unpaid deferred compensation.

In addition, Credit Suisse financial advisors will be receiving an Onboarding Agreement confirming the terms of resignation of employment from Credit Suisse in connection with a potential offer of employment from Wells Fargo Advisors.  It is imperative that Credit Suisse financial advisors contact an attorney to review the Onboarding Agreement, as it requires that the financial advisor release significant rights and claims, including claims against Credit Suisse for deferred compensation and other claims relating to the financial advisor’s employment with Credit Suisse.  In fact, the Onboarding Agreement advises the financial advisor to consult with an attorney before executing it.   Lax & Neville LLP has extensive experience and success representing and protecting the interests of financial professionals, including assisting brokers/financial advisors in reviewing recruitment packages and agreements, and counseling financial advisors of their legal rights surrounding those agreements.  Lax & Neville LLP also has successfully transitioned brokers between firms and counseled them through the transition process.  Lax & Neville LLP also has extensive experience representing financial advisors in compensation related claims.