Beals Hubbard, PLC advises and represents brokers who have been terminated or discharged by their employers.  The Broker's Corner is a weekly post on issues arising from stockbroker employment and separation.

This flagship post revolves around the thorny issue of Promissory Notes.  Generally, brokers sign a Promissory Note at the outset of employment and or in connection to a "retention bonus."  While employers call these payments bonuses, they are actually forgivable loans that must be repaid under certain circumstances.  While the loan is forgiven over time-each day you work, more of the debt is wiped out-it is standard practice in the industry to tie termination or resignation to the recipient's obligation to repay.  Thus, in the event of termination or resignation, the unforgiven portion of the Note becomes immediately due and owing.

In the event of involuntary termination, the broker/dealer may add insult to injury by filing a claim before the Financial Industry Regulatory Authority ("FINRA") for the entire balance due and owing as of the date of termination, plus interest, and attorney fees incurred in order to collect the amount due.  These actions are so common that FINRA now has a special Promissory Note procedure, appointing one arbitrator only-the norm is three-in cases where the balance on the Promissory Note does not exceed $100,000.00.  Unfortunately, these actions are also selective, targeting employees who may have left on difficult or unfavorable terms.

If you receive a letter from your former employer demanding re-payment of a portion of a retention bonus, do not panic.  There are numerous defenses to these actions.  First, there are the affirmative claims you may have such that you can sue your former employer in FINRA.  For example, if you were wrongly terminated or discharged or your employer interfered with the relationship you have with your clients, you likely have a cause of action.  Second, there are specific defenses to contractual agreements involving retention bonuses, especially if you received money as a trainee.  Finally, even if there are no claims and no solid contractual defenses, there is always the defense that the employer received the benefit of its bargain by retaining a portion of your book of business.  Thus, if you had $50,000,000.00 worth of assets under management and you only retained $15,000,000.00, you can assert that your employer got what it paid for.

Make no mistake, Promissory Note cases are difficult.  However, with experienced counsel standing shoulder to shoulder with you, you can drastically reduce your liability, prosecute any claims you may have, and ensure that your assets and livelihood are protected.

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