New York Securities Lawyer Blog

Published on: August 30, 2023

Client Represented by Lax & Neville Wins $1.8MM Award Against Morgan Stanley for Unsuitability and Failure to Supervise Investment in WisdomTree (WETF)

On August 21, 2023, a retired artist and teacher of the visually impaired represented by Lax & Neville LLP won a FINRA award against Morgan Stanley for its years-long recommendation that she invest her savings in WisdomTree (WETF), a sponsor of exchange traded funds (“ETFs”) and asset manager. Over a period of nearly seven years, the customer’s Morgan Stanley advisors, David and Todd Wachsman, solicited numerous purchases of WisdomTree stock even as its price fell and her position became highly concentrated. WisdomTree stock ultimately made up the vast majority of her networth. Despite numerous red-flags and internal recognition that the position was highly concentrated and sustaining substantial losses, Morgan Stanley permitted the Wachsmans to recommend additional investments in WisdomTree for years, including selling risky put options that significantly increased her exposure to decline in WisdomTree’s price, decimating her savings. Morgan Stanley’s primary defense was that, over the lifetime of the account prior to the first WisdomTree purchase a decade ago, Morgan Stanley had made money for the customer, a retiree in her mid-seventies, and was therefore entitled to bet it all on a single-stock strategy. Additionally, Morgan Stanley took the position that they warned the customer of the risks involved. However, it still allowed the Wachsmans to recommend that she purchase more WETF, that she sell other securities rather than WETF, and that she hold the overly concentrated position they built in her accounts.

After considering the pleadings, testimony and evidence presented at the hearing, the Arbitration Panel rejected Morgan Stanley’s defense and unanimously awarded the customer $1.8 million, including the entirety of damages caused by Morgan Stanley’s investment in WisdomTree market adjusted to account for Morgan Stanley’s mismanagement of her account during an historic bull market.

The Arbitration Panel also denied the expungement requests made on behalf of the financial advisors, Todd Wachsman and David Wachsman. To view this Award, Karen Busch v. Morgan Stanley Smith Barney, LLC – FINRA Case No. 21-00203, click here.

Published on: April 27, 2023

Ex-Merrill Financial Advisor Suspended and Fined for Violating FINRA Rule 2010 When He Took Photographs of Client’s Non-Public Information Before Leaving Firm

By Lax & Neville LLP

Recently, the Financial Industry Regulatory Authority (“FINRA”) Department of Enforcement fined and suspended an ex-Merrill registered financial advisor, who had been in the industry for nearly 35 years, for breaching FINRA Rule 2010 and firm policy by violating his duty to maintain the confidentiality of a customer’s nonpublic information. Merrill Lynch’s Employment Agreement also requires a financial advisor to preserve the confidentiality of nonpublic customer information and refrain from taking and disclosing such information upon termination of their employment. Customers’ nonpublic information, including dates of birth, social security and driver’s license numbers, account numbers, and tax information, is also protected under Regulation S-P. FINRA Letter of Acceptance, Waiver, and Consent No. 2021071850601, 2 (2021).

The financial advisor’s violative conduct consisted of taking pictures of confidential client information from the Merrill Lynch electronic systems. According to FINRA, the advisor took photographs, which contained customers’ names, dates of birth, social security numbers, and account numbers, for approximately 35 clients and advised the junior members of his team to take similar photos for at least 100 other customers. These photos were taken in anticipation of transitioning to another brokerage firm. When the advisor and his team resigned from Merrill Lynch, they retained the nonpublic personal information of customers. The information “was secured by the firm through which [the advisor] had become registered, and the firm returned the customers’ nonpublic personal information to Merrill Lynch prior to its use.” Id.

The advisor executed a letter of Acceptance, Waiver, and Consent (“AWC”) wherein he accepted the finding of a violation, consented to the imposition of sanction, and agreed to waive the right to a hearing before any panel, court, or administrative body. The FINRA AWC states that the Merrill Lynch advisor “improperly retained the customers’ nonpublic personal information” when transitioning to a new firm in violation of FINRA Rule 2010. Id. FINRA suspended the financial advisor for 10 workdays and fined him $5,000.

Published on: April 24, 2023

Four More Former Credit Suisse Advisers Represented by Lax & Neville LLP Win FINRA Arbitration Award Against Credit Suisse Securities (USA) LLC in the Deferred Compensation Arbitrations

By Lax & Neville LLP

On April 18, 2023, four more former Credit Suisse investment advisers represented by Lax & Neville LLP won a FINRA arbitration award against Credit Suisse Securities (USA) LLC for unpaid deferred compensation. See Simon Clarke, Mitchell Riesenberger, Jose Rodriguez-Villalobos, Jeremy Seidman v. Credit Suisse Securities (USA) LLC, FINRA No. 20-02093. Lax & Neville has tried nine arbitrations resulting in awards of more than $35 million to 30 former Credit Suisse advisers.

The Claimants, Simon Clarke, Mitchell Riesenberger, Jose Rodriguez-Villalobos, and Jeremy Seidman, 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. Credit Suisse took the position, as it has with hundreds of other former investment advisers, that the Claimants voluntarily resigned and forfeited their deferred compensation. A three-arbitrator panel awarded Claimants compensatory damages, including prejudgment interest, in the amount of $2,862,019.32. The FINRA Panel recommended expungement of Claimants’ Forms U-5, the termination notice a broker-dealer is required to file with FINRA. As with hundreds of their colleagues, Credit Suisse falsely reported that Claimants’ “Reason for Termination” was “Voluntary.” The FINRA Panel recommended that the “Reason for Termination” be changed to “Termination without cause.”

Lax & Neville LLP has won more than $35 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.

Published on: February 9, 2023

Another Former Credit Suisse Adviser Represented by Lax & Neville LLP Wins a FINRA Arbitration Award Against Credit Suisse Securities (USA) LLC in the Deferred Compensation Arbitrations

By Lax & Neville LLP

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.

Published on: September 22, 2022

CALIFORNIA AND ILLINOIS COURTS CONFIRM $10 MILLION AWARD AND $9.5 MILLION AWARD AGAINST CREDIT SUISSE FOR UNPAID DEFERRED COMPENSATION

By Lax & Neville LLP

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.

Published on: March 7, 2022

Brokerchalk Podcast – Shocking Revelations Around Merrill’s CTP Program

By Lax & Neville LLP

CLICK HERE FOR PODCAST

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.

Published on: March 3, 2022

Advisor Talk with Frank LaRosa – Legal Perspective Series – Advance Your Financial Advisor Career with Brian Neville

By Lax & Neville LLP

CLICK HERE TO LISTEN TO PODCAST

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:

Published on: February 24, 2022

Advisor Talk with Frank LaRosa – Legal Tips For Financial Advisors Considering a Transition with Brian Neville

By Lax & Neville LLP

CLICK HERE TO LISTEN TO PODCAST

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:

Published on: January 27, 2022

Lax & Neville has Won More Than $30 Million for Former Credit Suisse Advisers Seeking Deferred Compensation in FINRA Arbitrations

By Lax & Neville LLP

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.

Published on: December 7, 2021

Former Credit Suisse Advisers Win $9.5 Million and $9 Million Awards For Unpaid Deferred Compensation in FINRA Arbitrations

By Lax & Neville LLP

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.