Merrill Lynch has sent letters to about 200 former Advest Group Inc. brokers seeking money paid to them by Advest as forgivable loans as part of their sign-on bonuses. The letters said the nation’s largest brokerage would initiate arbitration with the NASD or the New York Stock Exchange if they don’t pay up. The brokers were given a one-month timeframe to pay; letters were mailed out this month.
Merrill paid $400 million for Advest’s broker force of 500 last fall, and roughly 40% have reportedly decamped for other firms since then. If Merrill prevails, it could get back as much as $18-20 million--depending on the individual brokers and deals, said Marc Dobin, attorney with Jupiter, Fla.-based law firm, Dobin & Jenks, who is representing a number of Advest brokers. “This is not an insignificant amount of money and Merrill Lynch has an obligation to their shareholders not to walk away from it,” he added.
A $600,000 producer who left for a regional firm in December recently received a $35,000 bill from Merrill Lynch. “I will probably pay it just to get away from them, instead of seeking legal action,” he said. He also lost $90,000 because his deferred compensation plan from Advest converted to Merrill and in order for him to receive it he would have to stay at Merrill for 18 months.
“This is chump change to Merrill,” said Bill Singer, securities lawyer from Gusrae, Kaplan Bruno & Nusbaum. “Merrill can be an 800 pound gorilla and demand money and sue, but it hurts their chances in the future of acquiring firms and competing for brokers in the marketplace.”
“We have notified the financial advisors who left owing money on their promissory notes that they have to live up to their agreements to repay what they owe,” said a Merrill Lynch spokesman. This is a routine and standard practice in the industry, he added.