Sting from Merrill's International Shift Lingers -- Update
November 23 2016 - 4:22PM
Dow Jones News
By Michael Wursthorn and Christina Rexrode
Bank of America Corp. is being accused of misleading some of its
Merrill Lynch brokers after introducing changes to its
international dealings that a lawsuit alleges "devastated" the
brokers' businesses and relationships with clients.
Lawyers for three former Merrill brokers -- part of the
so-called Thundering Herd, who worked in the U.S. but focused on
clients in foreign countries -- said the brokers were
"significantly hindered" by changes introduced by the bank in July
2015. Those changes included slashing the number of countries in
which the bank could target clients and curtailing the brokers'
ability to travel outside the U.S.
Merrill also mandated that international clients still serviced
by the firm have to travel to the U.S. to meet with their broker at
least once a year.
An amended complaint to the lawsuit, filed Tuesday in federal
court in the Western District of North Carolina, alleges that the
bank misled its brokers to believe the firm was committed to
serving international clients to keep the brokers from leaving the
firm. An initial complaint was filed in April.
"They were recruiting financial advisers into the firm...without
telling them they planned this change," said Michael Taaffe, a
lawyer at Shumaker, Loop & Kendrick LLP in Sarasota, Fla.,
which is representing the former Merrill brokers.
Mr. Taaffe said the suit, which seeks class-action status, aims
to hold Merrill accountable for how its decisions harmed brokers'
businesses and to ensure the brokers are adequately
compensated.
Merrill will continue fighting the charges. "We have denied and
continue to deny these allegations from this case brought early
this year and have already asked the court to dismiss it," a firm
representative said.
Brokers at firms such as Merrill can keep their client
relationships as they move from one firm to another and the revenue
they generate from those clients factors into how they are paid.
Mr. Taaffe says some brokers affected by the changes have lost more
than half of their clients because of the loss of access to
business in the clients' home countries and other restrictions.
Mr. Taaffe also alleged that many brokers were blindsided by the
changes as they contradicted statements made directly to brokers
and publicly by Bank of America Chief Executive Brian Moynihan.
"Wealthy clients, corporate clients and institutional
investors...operate around the globe. We have been building out our
capabilities to serve them in all those markets," Mr. Moynihan said
in a late 2010 speech, according to the suit.
Merrill has lost dozens of brokers in the wake of the changes.
When Bank of America reported fourth quarter 2015 and first quarter
2016 earnings, it said departures tied to the changes in its
international business dragged down its broker head count in those
periods.
Miguel Sosa was one of the brokers who left Merrill during that
period. At the bank, he served mostly wealthy investors in Spain
and the Caribbean, but, after the changes, his Spanish business was
eliminated and his work in the Caribbean was either "eliminated or
severely restricted, depending on the client's country," according
to the complaint. Since leaving Merrill, Mr. Sosa launched his own
firm, Premia Global Advisors LLC in Coral Gables, Fla.
Because of Merrill's changes, Mr. Taaffe said the brokers "lost
a lot of clients because clients don't want to change firms
repeatedly," adding that the clients are the brokers'
"lifeblood."
Write to Michael Wursthorn at Michael.Wursthorn@wsj.com and
Christina Rexrode at christina.rexrode@wsj.com
(END) Dow Jones Newswires
November 23, 2016 16:07 ET (21:07 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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