Morgan Stanley is mandated to disburse over $3 million to a collective of financial advisors who have levied allegations against the firm for illegitimately retaining their deferred earnings following their departure to alternative employment opportunities, as decreed by an arbitration panel.
This consortium of 10 advisors has raised accusations against Morgan Stanley for transgressing New York labor statutes and for a breach of fiduciary obligations concerning the organization’s remuneration schemes, as per the arbitration award announced on March 22. They argued that Morgan Stanley unjustly obligated them to surrender remuneration, contravening the Employee Retirement Income Security Act of 1974, or ERISA.
Alan Rosca, the attorney representing these 10 advisors, stated, "We believe this compensation was rightfully earned during their tenure at Morgan Stanley, and that the firm’s compensation strategy was not in alignment with ERISA."
The panel mandated Morgan Stanley to compensate the advisors with their deferred earnings, alongside interest and legal fees.
A representative for Morgan Stanley articulated the firm's dissent regarding the arbitration panel's verdict based in Chicago, asserting its intent to counter similar allegations.
"Morgan Stanley has historically provided deferred compensation to financial advisors as a gesture of appreciation for their dedication and stewardship," she remarked. "This is not to be misconstrued as a retirement plan, a perspective upheld by prior arbitration panels, and we maintain that the panel's recent decision was erroneous. Our stance is firm on rigorously contesting baseless implications to the contrary.
The claimants in this arbitration are Alfredo Serrano, Brian Thomas, Daniel G. Raupp, Denanne Heil, Gary Phelps, Henry Enno, Jeff Schimmelpfennig, Manfred Hegwer, Michael Bruner, and Scott Weissman, all of whom were employed at various Morgan Stanley branches in Illinois. Between 2017 and 2022, they transitioned to roles at competitor firms including Stifel Financial, LPL Financial, and Oppenheimer, as indicated by BrokerCheck, a database curated by the industry’s self-regulatory entity, Finra.
These advisors initiated their claims against Morgan Stanley in 2022, and following a concise four-day hearing session in February, the trio of arbitrators ruled in their favor.
This instance marks merely one of the numerous similar disputes Morgan Stanley is currently navigating. The firm is contesting analogous claims for retroactive compensation from approximately 150 financial advisors, as per Rosca, whose law practice, Rosca Scarlato, is representing these advisors in arbitration proceedings against the firm. These advisors have lodged arbitration claims, either individually or in groups, as detailed by Rosca, with legal offices located in Cleveland and Philadelphia.
"We are heavily engaged with these cases," he disclosed. According to the employment contracts signed by the advisors during their tenure at Morgan Stanley, they are obligated to resolve disputes through arbitration.
