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Regulation and Compliance > Federal Regulation > FINRA

Morgan Stanley Loses Another FINRA Fight Over Deferred Comp

By John Manganaro

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What You Need to Know

  • Morgan Stanley must pay about $1.1 million to a pair of its former advisors who accused the firm of failing to pay deferred compensation.
  • The new order comes as the firm continues to seek court intervention after a string of arbitration panel losses.
  • Morgan Stanley asserts that its compensation arrangement is fair and transparent — and not to be viewed as a retirement plan subject to ERISA.

A FINRA arbitration panel has ordered Morgan Stanley to pay about $1.1 million to a pair of its former advisors in Dallas who accused the firm of failing to pay deferred compensation to which they were legally entitled under “anti-alienation” rules set by the Employee Retirement Income Security Act.

The new order comes as the firm continues to seek court intervention in an ongoing saga involving deferred compensation “clawback” litigation filed by dozens of its former advisors across the United States.

A copy of the new order shared by an attorney representing the advisors shows Morgan Stanley must pay former advisors Jeff Davis and William Swisher compensatory damages of $297,465 and $144,879, respectively, plus annualized interest at the rate of 9% from Jan. 1, 2015 through and including May 13, 2024.

In addition, the order shows, Morgan Stanley must pay Davis and Swisher $235,395 in attorneys’ fees, pursuant to ERISA and New York labor law. Finally, the firm is also required to pay the advisors $20,000 to cover additional costs, plus certain fees, resulting in a total penalty of approximately $1.1 million.

Earlier this year, Morgan Stanley lost a substantially similar arbitration case that involved seven advisors and some $3 million in settlement payments. In its legal filings across the various cases, Morgan Stanley asserts that its compensation arrangement is fair and transparent — and not to be viewed as a retirement plan subject to anti-alienation provisions under the Employee Retirement Income Security Act.

Morgan Stanley’s attorneys have also argued that deferred compensation structures with clearly stated vesting periods and other payout requirements represent a long-accepted form of advisor incentive that has the potential to benefit both parties. The firm further argues that a recent trial court judgment to which it was subject has unfairly and improperly altered the outcome of such ongoing compensation-related FINRA arbitration matters, arguing the ruling should be remanded.

Credit: Bloomberg

John Manganaro

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