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Employment Law in the Securities Industry

The range of employment law issues facing broker-dealers’ corporate management, branch management and employees is varied and broad. In many instances, the counsel of experienced securities employment attorneys is needed to navigate these issues. The experienced and knowledgeable securities employment lawyers at Lubiner, Schmidt & Palumbo stand ready to assist both employers and employees in need of securities industry employment counsel.

Many firms have their retail brokers, investment bankers, analysts and middle/senior management employees sign employment agreements at the commencement of their employment. Any such agreement, whether from an employer’s perspective or that of the employee, should be reviewed by an experienced securities employment attorney.

Non-solicitation/non-competition agreements are frequently presented to retail brokers by their employers. Brokers should consult a securities employment attorney before signing such agreements since they could potentially hamper efforts to move their business to another brokerage firm some time in the future.

Frequently, analysts and investment bankers sign agreements containing “garden leave” clauses. Those clauses require the employee to give up to 60 days notice to the employer prior to resigning from the firm and starting a new position. An employee subject to such an agreement should consult a securities employment law attorney prior to resigning.

Notwithstanding the above, the Protocol for Broker Recruiting, also known as the Recruiting Protocol has eliminated many of the disputes that previously arose between departing brokers and their former employers. Now, if a broker resigns from a protocol member firm, joins another protocol member firm and follows the protocol procedures regarding resignation, taking customer information, etc., the prior firm will not seek to enforce any non-solicitation agreement that may exist. In this scenario, a broker contemplating joining a new protocol member firm should consult with an experienced securities employment attorney who can advise the broker of the proper protocol procedures.

Another potentially contentious area in the securities employment universe deals with promissory notes and forgivable loans. Retail brokers often receive upfront loans to entice them to leave one broker-dealer and join another. By terms of the notes or loans, the upfront payment is forgiven over time, typically three to five years. Should the broker decide to leave the new employer before the end of that term, he does so owing the employer money from the original loan that can sometimes be a significant amount. The experienced securities employment lawyers at Lubiner, Schmidt & Palumbo can assist brokers in negotiating a resolution of any claims for repayment made by the employer.

Lubiner, Schmidt & Palumbo has also recovered millions of dollars owed under the terms of promissory notes/forgivable loans on behalf of broker-dealers in industry arbitrations.

One recurring employment issue for both employees and employers is that involving the CRD disclosure language firms enter on registered persons’ U-4/5’s. It is essential for both the reporting firm and the registered representative that the CRD disclosure language be accurate and concise so as to reduce or eliminate defamation claims for inaccurate disclosures. In questionable cases, firms should consult experienced securities employment attorneys to assist them in drafting the disclosure. Employees who are concerned with the prospect of damaging or inaccurate language being entered on a CRD disclosure can consult the lawyers at Lubiner, Schmidt & Palumbo to work with their firm to insure the appropriate language appears on any CRD disclosure.

FINRA now has a procedure in place for registered persons to seek expungement of erroneous or inaccurate CRD disclosures. FINRA rules outline a procedure for expunging customer complaint disclosures from a broker’s CRD. Additionally, a broker may also be able to expunge regulatory disclosures and disclosures relating to a termination from a former employer, internal investigations, etc. The securities employment attorneys at Lubiner, Schmidt & Palumbo can review any problematic disclosures and advise a registered person on the expungement process.

Numerous employees in the financial services industry are compensated handsomely for their contributions to their firm’s bottom line. Compensation and bonus disputes frequently arise between highly compensated employees and their employers. For instance, year-end bonuses are frequently a significant, if not major, part of an employee’s annual compensation. But what happens if an employee quits or gets fired before the bonus, which she earned in the past year, gets paid? Is she still entitled to the bonus? The employment securities lawyers at Lubiner, Schmidt & Palumbo can help employees facing this and similar compensation issues with their current or former employer.

On Wall Street, most employees are at-will employees. However, the termination of an employee may involve the violation of a written or implied contract. Moreover, if an employee was fired as a whistleblower or was otherwise wrongfully terminated, that employee may have a cause of action against his employer. An employee who feels he was improperly fired or otherwise wrongfully terminate should consult the knowledgeable securities employment attorneys at Lubiner, Schmidt & Palumbo for advice.

Lastly, if a broker is considering retirement, but still wants to be compensated for the revenues produced by the accounts he has maintained and serviced for years, many firms have retired broker programs. These programs enable a retiring broker to transition his book of business to a new broker at the firm while still receiving a portion of commissions generated by his accounts for a set period. The securities employment attorneys at Lubiner, Schmidt & Palumbo can review any proposed agreement and assist the broker to obtain the most favorable terms.

As evidenced by the above, both employers and employees in the financial services industry are frequently confronted with significant employment legal issues. Analyzing and resolving these issues may require the assistance of experienced securities employment attorneys such as those at Lubiner, Schmidt & Palumbo.

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