A former Morgan Stanley broker has been ordered to repay the firm more than $2 million of his recruiting bonus after the firm said he left before his contract expired.
Advisor Wilhelm Nash, who left Morgan Stanley in 2010 after two years at the firm, departed to Credit Suisse before his upfront loans had fully vested, the firm said in a complaint filed with FINRA. To incentivize an advisor to move, many firms offer top advisors large recruiting packages with a sizeable upfront loan that is considered paid off if an advisor remains with the firm for a certain amount of years or meets certain growth targets.
If an advisor moves early, however, the firms will frequently litigate to recoup the money, according to attorney Eva Posman, an attorney in New York.
The firms are usually pretty adamant, Posman, who initially represented Nash but represents brokers in similar cases, said generally of the industry. They dont like to set a precedent.
Posman and another former attorney of Nashs declined to comment on Nashs case citing client confidentiality. Nash did not return a request for comment. His current firm, UBS, also declined to comment, as did Morgan Stanley.
Morgan Stanley valued the remainder of Nashs three promissory notes at $1.6 million, $256,182 and $144,815. An arbitration panel found Nash liable for all three in addition to $238,610 for Morgan Stanleys attorneys fees and $25,515 in additional costs.
Nash initially retained legal counsel and filed a $2 million counter claim in which he argued that he had left due to constructive discharge, meaning that conditions had been made so difficult at the firm that he had no choice to leave. Ultimately, however, he dismissed his attorneys and did not show up for the hearing, according to the arbitration award.
Recruitment bonuses have reached as much as 300% or more of previous years production, usually with half paid in cash up front, according to a study from Boston-based consulting firm Cerulli associates. Posman said it is not uncommon for brokers to move several times between firms in their career because of signing bonuses. Nash has been registered at 10 firms since he started in the industry in 1992, according to public registration records with FINRA.