Merrill Lynch fined for trying to avoid arbitration.

Posted by on Jan 25, 2012 in arbitration, Stockbroker issues | Comments(0)

I thought this smelled when I first heard about it. When Merill Lynch merged with Bank Of America, the retention awards were made by an entity called Merrill Lynch International Finance, or some such nonsense. And I heard that there was a specific waiver of counterclaim rights in the agreement. Of course, brokers signed these agreements. What are the chances that they read them? About as high a rate as one might expect of those people who read the iTunes license agreement. (Google “south park” and “Why won’t it read?”)

It was quite obvious to me that Merrill Lynch had overplayed its sizable power. It was also clear that Merrill was trying desperately to avoid going to the very forum that it has used for years, arbitration. Merrill is likely sick and tired of arbitrators actually applying the “real world” to its employment situations instead of the world according to Merrill’s employment lawyers at their high-priced law firms. (I have friends at those firms, but it doesn’t mean I agree with them.)

FINRA got wind of what Merrill/Bank of America was up to. And it has cost Merrill $1,000,000 in fines to atone for its sin of trying to avoid arbitration. Reuters reports that Merrill gave out $2.8 billion in retention bonuses and used this ruse to avoid arbitration. One wonders what other things Merrill Lynch did and is still doing to brokers who went through the retention process. Those may come to light as well.

In the meantime, FINRA did its job and stopped Merrill from continuing to pull this stunt. Like I said at the beginning, it didn’t smell right. It seems that FINRA picked up the same odor and traced it to its source.

Print Friendly, PDF & Email

Comments are closed.