Morgan Stanley, Merrill Lynch Face Deferred Compensation Claims

A number of advisors have filed claims against investment firms in connection with allegations that the firms illegally withheld their deferred compensation, with some winning seven-figure sums. As an AdvisorHub report published last month explains, an ex-Merrill Lynch broker filed a putative class action complaint against the firm. The claim specifically alleges that the firm’s deferred compensation arrangement “qualifies as an employee benefit plan governed by the Employee Retirement Income Security Act of 1974 and is subject to its anti-forfeiture provisions.”

The putative class action’s plaintiff alleges that when he left the firm in 2021, he “was forced to relinquish $500,000 in deferred compensation,” arguing that because a predetermined amount of brokers’ commission payments are automatically withheld, they “cannot be considered a bonus.” In November 2023, according to the report, a federal judge ruled in a similar lawsuit against Morgan Stanley that that firm’s deferred compensation plan “likely does fall under ERISA guidelines.” In April, meanwhile, a group of seven former Morgan Stanley brokers won more than $3 million in deferred compensation in an arbitration award.

Earlier this month, two other former Morgan Stanley brokers won more than $1 million in an arbitration claim against the firm over deferred compensation, according to Investment News.  Morgan Stanley said in a statement that its deferred compensation plan “is not a retirement plan,” adding that it would “aggressively defend against meritless attacks suggesting otherwise.”

Morgan Stanley has appealed the November 2023 decision finding that deferred compensation likely falls under ERISA. According to AdvisorHub, the decision “granted Morgan Stanley’s request to compel advisors to arbitrate their claims but also concluded that its deferred compensation plan was subject to federal pension laws, a central tenet of the brokers’ claims that their forfeiture was illegal.” The firm warned that the decision was “wreaking havoc” on its efforts to defend itself in arbitration proceedings over deferred compensation. “Morgan Stanley has long offered deferred compensation to financial advisors to reward them for loyalty and good guardianship during their employment,” the firm said in a statement to AdvisorHub, again stressing its intention to defend against the claims.

Carlson Law represents investors and investment professionals throughout the United States in claims against investment firms. If your deferred compensation has been withheld, please call us at 888-976-6111 or complete our contact form for a free and confidential consultation.