Merrill “International” Brokers Bulk Up Class-Action Claim
Former and current “international” brokers at Bank of America Merrill Lynch are alleging in a purported class-action lawsuit that bank executives fraudulently misled them about its commitment to working with retail customers outside the U.S. and seeks triple damages under an anti-racketeering law.
The complaint filed last week in federal court in the Western District of North Carolina, where Bank of America is based, supplements a claim filed against Merrill Lynch in April by three former brokers seeking class-action status. It adds details on policies implemented by Merrill in 2015 and 2016 that allegedly led to “severe” restrictions on U.S.-based brokers’ business with nonresident clients (NRCs) and restates the claim that the policies disproportionately affected certain employees “of protected races and national origin.”
Merrill in 2015 reduced the number of countries brokers could serve to 29 from 80 and raised account minimums for new nonresident clients to $2.5 million (and to $1 million for grandfathered clients). It also required two face-to-face client meetings annually between broker and client, one of which had to occur in the U.S., at the same time that it prohibited brokers from traveling to 21 countries, according to the amended complaint. The “limited-service” countries ranged from Argentina, Australia and Israel to the United Kingdom, Uruguay and Venezuela.
These and other changes, including a 2015 requirement that brokers complete an annual assessment to retain their international advisor status, “shut down or heavily restricted” nearly two-thirds of brokers’ international business and forced many of them to leave the firm, the complaint says.
The policies contravened Bank of America Chief Executive Brian Moynihan’s public declaration in 2010 that the bank was committed to its international retail financial services business, a speech that encouraged brokers to believe the bank “would continue to support and nurture their business relationships,” the complaint says. Moynihan “had to be aware” at the time he was promoting such global aspirations that Merrill had prepared internal analyses to significantly pare back the business, the amended complaint says.
In 2013, Moynihan ordered Merrill Lynch Wealth Management head John Thiel in 2013 to materially reduce or eliminate the international business over time.
“Any positive rhetoric delivered by Merrill Lynch regarding its international business was a red herring and served to falsely encourage Class Members to believe they would not incur detriments and damages,” the complaint says. “[A]ny statements made by Merrill Lynch after 2013 that related to the company’s commitment to the international business and its success were directly contradicted by the intention of CEO Moynihan.
A Merrill spokesman said the company stands by its denial of the earlier allegations as well as those in the amended complaint. “We’ve already asked the court to dismiss it,” he said of the lawsuit.
The new complaint tacked on a so-called RICO (Racketeer Influenced and Corrupt Organizations Act) count that says the three brokers who brought the lawsuit and their purported class-action colleagues were “severely damaged due to the criminal enterprise instituted and perpetuated” by Merrill.
Many brokers resigned or took early retirement as a result of Merrill’s new policies, leading to “loss of business, loss of opportunity, loss of unvested deferred compensation, paying back promissory notes prior to expiration of the term, emotional distress and other harms,” the complaint says.
About 100 of the 300 NRC brokers at Merrill prior to 2015 are still with the firm, said Michael Taaffe, a lawyer at Shumaker Loop & Kendrick in Sarasota, Fla., who represents the three named plaintiffs.
The plaintiffs, Graciela Perez, her son, Jorge, and Miguel Sosa, are each of Hispanic origin.
“The disparate impact of Merrill Lynch’s employment practices…upon the named Plaintiffs as compared to an average domestic FA who did not have the policy changes damaging or eliminating large portions of his business is without comparison,” the complaint said in charging Title VII discrimination.