New York Securities Lawyer Blog
On November 6, 2018, Nicolas Finn, a 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. On November 27, 2018, Credit Suisse petitioned the New York Supreme Court (Commercial Division) to vacate the Finn Award on grounds of arbitrator misconduct and manifest disregard of the law. See Credit Suisse Securities (USA) LLC v. Nicholas B. Finn, CV 655870/2018. The Honorable Judge Jennifer Schecter, by order dated April 24, 2019, denied the Petition to Vacate in its entirety and entered judgment for Mr. Finn.
Credit Suisse is currently being sued by dozens of its former investment advisers in connection with the 2015 closure of its US private bank. Four FINRA Panels have issued awards thus far, all of them finding Credit Suisse terminated its advisers without cause and ordering it to pay deferred compensation. This is the first time a court has heard Credit Suisse’s defenses to the Credit Suisse Deferred Compensation Arbitrations.
Credit Suisse contended that the Finn Panel acted in manifest disregard of the law on two issues. First, Credit Suisse argued that Mr. Finn resigned as a matter of law when he left Credit Suisse on November 23, 2015, a month after Credit Suisse announced it was closing its private bank. Under the terms of Credit Suisse’s contracts with its investment advisers, deferred compensation is cancelled immediately upon voluntary resignation but vests immediately upon termination without cause. The evidence at arbitration overwhelmingly established that Credit Suisse both structured the closure of the private bank and deliberately concealed and misrepresented material information in order to mischaracterize its advisers as having “resigned” after they were given no option but to leave Credit Suisse. It then cancelled more than 95% of its advisers’ deferred compensation, amounting to almost $200 million. The Finn Panel rejected Credit Suisse’s argument that Mr. Finn resigned voluntarily and ordered expungement of “Voluntary” termination from his Form U-5. The Panel recommended that the Form U-5 be amended to state that the reason for termination was “Termination Without Cause.”
Having reviewed the record, including ten days of testimony and more than a hundred internal Credit Suisse documents, the Court observed that Mr. Finn had no option but to leave Credit Suisse and that the Panel was not in manifest disregard of the law when it found he was terminated involuntarily.
Second, Credit Suisse argued that even if Mr. Finn was terminated without cause, immediately vesting 100% of his deferred compensation, he was “made whole” when he accepted employment with UBS. As part of his hiring package, Mr. Finn was to receive forgivable promissory notes over the course of nine years provided he remained an employee in good standing at UBS and met a production target. In effect, Credit Suisse contended that, as a “matter of black letter law,” Mr. Finn must work 9 years for UBS in order to pay off Credit Suisse’s debt to Mr. Finn.
The Court disagreed, finding that even in the event Mr. Finn remains at UBS for 9 years and receives 100% of his UBS compensation “[h]e will have earned it from UBS and he will have earned it from Credit Suisse.” It held that the Panel did not act in manifest disregard of the law when it found there was no “mitigation” of a vested right to compensation by Credit Suisse.
Credit Suisse owes more than $100 million in deferred compensation to investment advisers who joined firms other than Wells Fargo after Credit Suisse terminated them without cause. To discuss this matter, please contact Barry R. Lax, Brian J. Neville, Sandra P. Lahens or Robert R. Miller at (212) 696-1999.