Finra arbitrators award $2.1 million to four former Credit Suisse reps

Finra arbitrators awarded $2.1 million to four former Credit Suisse registered representatives in a dispute involving deferred compensation.

In the Feb. 14 award, a three-person Financial Industry Regulatory Authority Inc. arbitration panel found Credit Suisse liable for a breach of contract involving Jonathan J. Galli, Paul T. Connolly, Alexander V. Martinelli and Christopher L. Herlihy.

The arbitrators awarded each of them compensatory damages, costs and attorneys’ fees. They also awarded Mr. Herlihy interest on his damages. The total award was $2,096,609. The arbitrators denied Credit Suisse’s counterclaim.

Three of the reps left Credit Suisse at the end of 2015 and the other departed in early 2016 after the firm shut down its brokerage business in the fall of 2015. At the time, Credit Suisse entered an exclusive agreement with Wells Fargo to recruit Credit Suisse registered representatives.

Messrs. Galli, Connolly, Martinelli and Herlihy instead joined UBS. They alleged that Credit Suisse withheld deferred compensation that it owed them. Their case is one of several compensation disputes that have been brought against Credit Suisse by former brokers.

The key to the case was that arbitrators found the four brokers had their jobs eliminated by Credit Suisse and were eligible for the pay they say was withheld, said their attorney, Barry Lax.

“My clients are happy that they proved that Credit Suisse constructively terminated them and that Credit Suisse now has to pay their deferred compensation,” said Mr. Lax, owner of Lax & Neville.  

Credit Suisse disagreed with the award and indicated it will fight back.

Jonathan Schwarzberg, a Credit Suisse spokesman, said a Finra arbitration panel last fall awarded the firm $9 million in damages and found that more than 100 of its reps left to join UBS as part of “an unlawful raid orchestrated by UBS.”

“This recent case expressly reconfirms this obviously correct point that the claimants resigned and were not entitled to deferred compensation,” Mr. Schwarzberg said in a statement. “We do, however, see several errors in the panel’s decision to award any damages, since the claimants experienced none. Credit Suisse will vigorously defend any case that seeks unjust double compensation or otherwise seeks to paint individuals who ‘hit the lottery’ as victims.”

Credit Suisse points to the fact that the Finra arbitrators did not expunge the reason for the claimants’ departure on their records as evidence that they did resign to go to UBS.

Mr. Lax dismissed that assertion. The arbitrators “obviously found [the brokers] were constructively discharged,” he said. “They didn’t need to expunge the Form U5.”

The former Credit Suisse brokers asked for about nine times more in damages than they received, but that didn’t get Mr. Lax down.

“In these arbitrations, you tend not to get everything you ask for,” he said. “In arbitration, a win is a win.”