Former Merrill Lynch Brokers, Bank of America Agree to Settlement
September 08 2016 - 12:59PM
Dow Jones News
By Christina Rexrode
Bank of America Corp. agreed to a $12.8 million settlement with
a group of former Merrill Lynch advisers who had alleged that the
bank wrongfully withheld some of their bonus payments.
The settlement, approved Tuesday by a U.S. District Judge in
North Carolina, will give cash payments to about 270 former Merrill
Lynch advisers, with average payouts of about $47,000 each,
according to the law firm that handled the case for the former
employees.
The advisers had all worked at Merrill before it was bought by
Bank of America during the financial crisis, and all were
terminated at some point after the merger.
The issue, according to the advisers' lawsuit, was that the bank
failed to follow the proper procedures when it terminated the
advisers "with cause," which made them ineligible to collect money
they had earned through long-term incentive plans that had yet to
vest.
In court documents, Bank of America denied the allegations and
said it didn't wrongfully withhold funds from the former employees.
A bank spokesman declined to comment further.
The settlement underscores the years-old tension between
Merrill's "thundering herd" of 14,400 advisers, some of whom chafed
at being scooped up by North Carolina-based Bank of America. It
also highlights industrywide questions about the worth of
wealth-management divisions, which can provide steady revenue but
with high costs, largely because of advisers' pay.
According to the former Merrill employees, the bonus contracts
required Bank of America to notify Merrill employees who were going
to be terminated with cause and give them the chance to defend
themselves. According to the former employees, the bank didn't do
so.
Michael Taaffe, the lead attorney on the case, said in an
interview that Bank of America was also "overly generous" in how it
defined cause, as a way to save money. Mr. Taaffe said the
settlement excluded any advisers who had been suspended for more
than a year or barred from the industry by the Financial Industry
Regulatory Authority, the brokerage industry's self-regulator.
Mr. Taaffe is head of broker-dealer litigation at Shumaker, Loop
& Kendrick LLP, which has previously represented other former
Merrill Lynch advisers, including two who also filed claims over
unpaid compensation and were awarded more than $10 million in
2012.
Shumaker, Loop & Kendrick estimates that another 6,500
advisers currently at Merrill are also eligible for these payouts.
The settlement agreement reinforces the pay contracts, requiring
Bank of America to follow certain procedures if it plans to
terminate an adviser with cause.
Write to Christina Rexrode at christina.rexrode@wsj.com
(END) Dow Jones Newswires
September 08, 2016 12:44 ET (16:44 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
Bank of America (NYSE:BAC)
Historical Stock Chart
From Aug 2024 to Sep 2024
Bank of America (NYSE:BAC)
Historical Stock Chart
From Sep 2023 to Sep 2024