Arbitration War Launched by Ex-CS Brokers for Deferred Pay
A former Credit Suisse advisor in Florida has filed an arbitration claim for almost half a million dollars of deferred compensation that he alleged the Swiss bank is withholding because he moved to UBS Wealth Management Americas in December.
Scores of other Credit Suisse brokers who left late last year and early this year for UBS, Morgan Stanley and other firms are expected to file similar claims, saying they had no choice but to leave because the Swiss banking giant is closing its U.S. brokerage operations.
Credit Suisse was among the first banks during the financial crisis and beyond to offer deferred cash and stock bonuses. In some cases, brokers left with millions of dollars of unvested compensation stranded in various Credit Suisse programs.
“We have about 20 clients with close to $20 million of claims that will be litigated,” said Barry Lax, a partner at Lax & Neville in New York City.
The claim filed last Thursday was made by Alax Gittler, 52, who had been with Credit Suisse’s U.S. brokerage operation for more than 15 years. It was filed with the Financial Industry Regulatory Authority’s arbitration forum, and may be the first such FINRA claim in the unusual Credit Suisse situation.
In his statement of claim, Gittler, who was based in CS’s Brickell Avenue office in Miami and is now with UBS in Coral Gables, said the money Credit Suisse is withholding accumulated in 18 awards program. He joined Credit Suisse when it bought his employer Donaldson, Lufkin & Jenrette in 2000.
Gittler concedes that the close to $400,000 he had accumulated in deferred pay through the end of 2014 had not yet vested when he left on December 1. However, he says he was entitled to the money plus compensation accumulated in 2015 because he was terminated without cause.
Under terms of the bonus programs, all awards should automatically vest in such situations, said Curtis Carlson, Gittler’s lawyer at Carlson & Associates in Miami. Credit Suisse contended in a letter sent Gittler on December 30, 2015, that his awards were canceled.
“[Credit Suisse] could, if it wanted to or had a shred of integrity, accelerate the vesting of all deferred compensation awards earned by and granted to all Credit Suisse advisors who have had to find new employment as a result of the decision…to shut down its operations in the United States,” the claim said.
Such behavior also is required under Finra’s Rule 2010 code of conduct that requires firms to observe “high standards of commercial honor and just and equitable principles of trade,” according to Gittler’s claim.
A Credit Suisse spokeswoman declined to comment. The firm last year filed an arbitration claim against UBS for raiding its brokerage force.
Credit Suisse in November told its approximately 170 U.S. advisors they could collect most of their deferred compensation, excepting what had accumulated in 2015, if they agreed to join Wells Fargo Financial Advisors.
The two companies had negotiated an exclusive agreement giving Wells Fargo direct access to recruit the advisors, but Wells Fargo has recently said it does not expect to attract a significant number of CS brokers.
Some advisors said they were reluctant to take the Wells deal because its bonus programs would require them to stay for 10 years or longer to get full payout. Some of their clients already have accounts at Wells, which could create internecine battles as well as concentrations of wealth at a single bank that clients want to avoid, an attorney said.
Carlson said he expects to file another claim today on behalf of Meryl Spigelman, another former Credit Suisse advisor who has joined UBS’s Coral Gables office. It will be for under $100,000.
Gittler seeks deferred pay between $400,000 and $500,000 relating to his employment in the first 11 months of 2015, plus triple the amount he is owed in punitive damages. His claim also accused Credit Suisse of falsely writing on his U-5 record in Finra’s Central Registration Depository that he resigned voluntarily.
“Alex has always maintained, and wanted it clear on his CRD record that he left….because the Firm has announced it is closing its domestic business,” the claim says.
Carlson said he hopes that the FINRA arbitration process will be completed in 2016.
Many CS advisors who have not joined Wells Fargo will undoubtedly have to wait longer because the Swiss bank recently won a court battle that lets it avoid Finra arbitration in favor of other forums. Battling over arbitration forums eats up time and raises attorney’s fees to the advantage of employers, several attorneys said.
– Additional reporting by Mason Braswell.