Credit Suisse shuttered its U.S. wealth management unit two years ago, but the firm could still
FINRA arbitrators issued last week what appears to be the first decision in dozens of claims brought by the firm’s former brokers. The panel ordered Credit Suisse to pay advisor Brian Chilton more than $844,000, according to a copy of the award.
“It was a huge victory,” Chilton’s attorney, Barry Lax, said.
In contrast, a Credit Suisse spokeswoman sought to downplay the decision, noting that Chilton failed to win all the damages he sought and that the arbitrators ordered him to pay more than $15,000 for failure to repay a promissory note. She also added that another former Credit Suisse advisor's lawsuit against the firm was recently rejected by a federal court in California.
Either way, the decision in the Chilton case shows how Credit Suisse’s unorthodox exit from the U.S. wealth management business in 2016 is playing out years later.
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The advisers are also balking at the firm's insistence that former advisers seeking to claim comp go through its dispute resolution process instead of FINRA.
May 12 -
The firm is asking a judge to dismiss a class action suit and force a former broker into arbitration, instead.
April 3 -
After losing dozens of advisors who managed billions in client assets to UBS, scorned Credit Suisse strikes back with legal challenge.
December 17
Rather than sell its high-end brokerage unit to a competitor, Credit Suisse signed an exclusive recruiting arrangement with Wells Fargo. Under the deal, Credit Suisse advisors could move their practices to the wirehouse unhindered prior to Credit Suisse closing shop in March 2016. If the advisors chose not to move to Wells or to join a competitor, Credit Suisse declared their deferred compensation forfeit.
Only about 110 of the Swiss firms’ 250 U.S.-based advisors took the deal, with the bulk of the rest joining rival UBS (Credit Suisse is currently pursuing
“When deferred compensation is granted to you, it vests over time. But if there is a termination without cause, the deferred compensation immediately vests. Likewise, if you resign, the deferred compensation is forfeited. The whole reason for that concept is to incentivize the brokers to stick around,” says Lax, of Lax & Neville in New York.
The ensuing compensation dispute grew increasingly bitter when Credit Suisse insisted former employees' claims be heard in private arbitration rather than in FINRA arbitration.
Prompted by complaints’ from attorneys representing the brokers, FINRA took the unprecedented step in July 2016 of
Chilton filed his arbitration claim in October 2016, seeking damages from Credit Suisse for breach of contract and unjust enrichment among other allegations, according to a copy of the award. It took the arbitrators 50 pre-hearing and hearing sessions before they reached a decision.
In siding with Chilton, the panel also ordered the explanation for termination on his Form U5 changed to “terminated without cause.”
“The reason that they used this language is that if you are terminated without cause, then your deferred compensation vests,” Lax says. His law firm also represents other former Credit Suisse brokers pursuing similar claims against the firm.
Though Chilton won his case, the arbitrators awarded him less than the amount he initially sought: more than $1.3 million, plus attorneys’ fees and other damages.
