Finra arbitrators order Credit Suisse to pay $1.3 million to former rep

Credit Suisse lost another round last week in its ongoing battle against brokers who claim the firm owes them money following the closure of its U.S. wealth management arm more than seven years ago.

Three Finra arbitrators ordered Credit Suisse to pay $1.3 million to James Garrity in a case centering on deferred compensation. The firm has been embroiled in disputes over money it allegedly has withheld from former representatives since its October 2015 decision to shutter its U.S. private bank.  

Credit Suisse had a recruiting agreement to send its brokers to Wells Fargo. But the brokers involved in the arbitration cases went to other firms. When Garrity lost his job at Credit Suisse, he moved to a Morgan Stanley office in La Jolla, California, according to his BrokerCheck profile.

In an arbitration claim filed in December 2020, Garrity cited breach of contract and unjust enrichment, among other causes of action, according to the Feb. 2 award. The Financial Industry Regulatory Authority Inc. arbitration panel found Credit Suisse liable and ordered it to pay Garrity $1,018,624 in compensatory damages and $363,244 in prejudgment interest.

The arbitrators also ordered Garrity to pay Credit Suisse $34,150 in unearned fees that he received at the beginning of the quarter in which he left the firm. The total amount Credit Suisse must pay Garrity is $1,347,719.

“I’m extremely satisfied that Mr. Garrity was awarded the deferred compensation that was taken from him by Credit Suisse,” said his attorney Barry Lax, a partner at Lax & Neville.

The Garrity award represents the eighth successful case — on behalf of 26 clients — Lax has argued in Finra arbitration involving a dispute centering on deferred compensation at Credit Suisse.

“Our firm understands the law and the facts related to Credit Suisse’s unlawful behavior in the fall of 2015,” Lax said.

Credit Suisse has prevailed in some of the deferred compensation cases, including one a year ago. In that case, the firm maintained that the former brokers were trying to “double-dip” by clawing back deferred compensation from Credit Suisse while pocketing payments from their new firm meant to make up for the abandoned money.   

Credit Suisse may try to overturn its latest arbitration loss.

“The arbitration award enforced Credit Suisse’s rights on its counterclaim, and also recognized that [Garrity] resigned his employment (and was not terminated), which is the key factual point we made throughout the case,” Credit Suisse spokesperson Andre Rosenblatt wrote in an email. “The partial award in [Garrity’s] favor, however, is legally flawed, and we are considering our options.”

The Finra arbitrators denied Garrity’s request to amend or remove from his Form U5 the reason why he left Credit Suisse. The citation remains “voluntary.”

But Lax said Credit Suisse’s decision to shut down its U.S. wealth division forced reps like his clients to leave. It was not of their own volition.

“How in the world can an employer tell their employees they ‘voluntarily resigned’?” Lax said. “That’s unlawful and it’s unequitable.”