Ex-Merrill Broker Sentenced to Three Years for Sales Practice Violations

A federal judge in the U.S. District Court for the Eastern District of Missouri sentenced Greg J. Campbell on charges that he had siphoned off almost $2 million from client accounts, including that of an 85-year-old client with dementia, for personal use.

According to press reports, Campbell was ordered to repay $1.8 million in restitution and forfeit property purchased with client funds. Campbell’s scheme began in September 2007 while he was a broker working for Merrill Lynch, according to a court filing by the U.S. Attorney’s office in St. Louis, Mo.

The reports continue sayin that he opened and oversaw Loan Management Accounts, which are credit lines collateralized by securities held in customer accounts, under his clients’ names and then used those funds for down payments on a personal residence, mortgage payments, vehicle lease payments and living expenses, the filing said. He hid the activities by falsifying signatures on letters of authorization, replacing balances at one account with those of another client’s, and sending account statements to unrelated addresses to which only Campbell had access, according to the complaint.

More details are available at Ex-Merrill Broker Sentenced to More Than 3 Years 

UPS Pension Investigation

We are currently investigating claims involving the management of brokerage accounts by Merrill Lynch for employees and former employees of UPS and their pensions. Allegations have surfaced regarding over-concentration, and the use of the stock as collateral for loans.

If you have any information regarding these issues, please call our office at 212-509-6544 or email us at ups-info@sallahlaw.com

Bank of America Still Causing Problems for Merrill Brokers

Bank of America has always been a disaster in the brokerage business, with a long history of mistreatment of its brokers. That outrage became well known when it took over the failing Merrill Lynch in 2008. Bank of America forced brokers out of the firm, by reducing payouts, refusing to pay for business which had already been booked, and for generally not having a clue how to run a brokerage firm. Merrill Lynch was not much better, given the fact that it was virtually bankrupt by the fourth quarter of 2008.

The complete mismanagement of the firm, first by Merrill, compounded by Bank of America, forced brokers to leave the firm, and doing so at their own financial peril, leaving behind significant deferred compensation and outstanding promissory notes. Apparently, staying was even worse.

That trend continues, three years later. On Wall Street is reporting that UBS is hiring teams of Merrill Lynch brokers. In an article "UBS Hires Raft of Veteran Merrill Brokers" Ashley Lau reports that UBS had placed a premium on brokers from Merrill, Bank of America's brokerage unit, by increasing up-front bonuses offered to those who signed before the end of 2011. That move came at the same time that Merrill brokers were about to receive the last of two big payouts on previous incentive plans.

The article continues to say that industry analysts said in early January that they expect to see more defections from Merrill's "Thundering Herd" of brokers, many already frustrated with changes since Bank of America purchased the firm three years ago, after the award payments are made in late January and early February.

We have been representing brokers in transition, contract and promissory note matters for over two decades, and are presently representing former Bank of America and Merrill Lynch brokers with their transition and promissory note issues. We have set up a dedicated email address for inquires from brokers who need assistance with their employment issues with Merrill Lynch, or any other wirehouse - brokers@seclaw.com


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FINRA Fines Merrill Lynch $1 Million for Failure to Arbitrate Disputes With Employees

FINRA has fined Merrill Lynch, Pierce, Fenner & Smith $1 million for failing to arbitrate disputes with employees relating to retention bonuses. Registered representatives who participated in the bonus program had to sign a promissory note that prevented them from arbitrating disagreements relating to the note, forcing the registered representatives to resolve disputes in New York state courts.

After merging with Bank of America in January 2009, Merrill Lynch implemented a bonus program to retain certain high-producing registered representatives and purposely structured it to circumvent the requirement to institute arbitration proceedings with employees when it sought to collect unpaid amounts from any of the registered representatives who later left the firm. FINRA rules require that disputes between firms and associated persons be arbitrated if they arise out of the business activities of the firm or associated person.

In January 2009, Merrill Lynch paid $2.8 billion in retention bonuses structured as loans to over 5,000 registered representatives. Merrill Lynch structured the program to make it appear that the funds for the program came from MLIFI, a non-registered affiliate, rather than from the firm itself, allowing it to pursue recovery of amounts due in the name of MLIFI in expedited hearings in New York state courts to circumvent Merrill Lynch's requirement to arbitrate disputes with its associated persons. Later that year, after a number of registered representatives left the firm without repaying the amounts due under the loan, Merrill Lynch filed over 90 actions in New York state court to collect amounts due under the promissory notes, thus violating a FINRA rule that requires firms to arbitrate disputes with employees.

FINRA Fines Merrill Lynch $1 Million for Failure to Arbitrate Disputes With Employees

Moody Lowers Bank of America's Debt Rating

Not much of a surprise here - Moody's Investors Service has lowered Bank of America Corp.'s debt ratings, saying it is now less likely that the U.S. government would step in and prevent the lender from failing in a crisis.

Still watching for the Merrill spinoff........

Moody's lowers BofA's debt ratings, shares tumble

Bank of America is Doomed. Just File Bankruptcy Now

While I still have a problem with Henry Blodget still participating in the financial industry, even as a columnist, great article on Bank of America's imminent bankruptch. The full title is BANK OF AMERICA IS DOOMED, Says Chris Whalen-Stop Firing People and Just Declare Bankruptcy Now.

Whalen is arguing for a government seizure of the bank, and a reorganization. I am not so sure that is possible, but he makes a great point - 

Bank of America is rearranging chairs on the deck of the Titanic. And firing thousands of people who don't need to be fired.

BANK OF AMERICA IS DOOMED, Says Chris Whalen—Stop Firing People And Just Declare Bankruptcy Now

Merrill Brokers Next Target for BofA?

The forced departure of Sallie Krawcheck may be a sign of more than just problems at Bank of America - we may be seeing the start of an internal attack on Merrill Lynch brokers.

We all know the contempt that Bank of America has for it's own securities firm employees - witness what it did to its bank brokers when it cut their pay in half, but industry media is speculating that two of the reasons Krawcheck was canned was first, her refusal to force Merril Lynch brokers to push Bank of America products on their customers, and two, her opposition to a move to radically alter compensation at Merrill Lynch by altering the commission structure and putting brokers on a salary plus bonus.

I am sure that she was opposed to the salary and bonus plan, most right-thinking industry executives know that such a compensation scheme does nothing to benefit the broker, and will cause long term damage to the business. Bank of America will undoubtedly wrap itself up in the American flag and claim that it is a move designed to align the broker's interests with the customer, but that is simply nonsense. Wrap fee accounts did that - the broker is compensated for his success in managing the assets. Putting brokers on salary is simply a money grab - taking money from your own employees to shore up your abysmal failure on the banking side.

We all know that Bank of America is failing, and that the only profitable piece of its operations is Merrill Lynch. Again, rather than fix its problems on the banking side, it is going to attempt to cannibalize the brokerage side, and take compensation from its employees.

That is not a coghent business plan. Has BofA really forgotten what happened when it pulled a similar stunt on its bank brokers? They left in droves.

Watch for Merrill brokers to do the same. 

Related articles, courtesy of Zemanta:

• Two Interesting Rumors Circulating After The Firing Of Sallie Krawcheck (BAC)
• What Sallie Krawcheck's Ouster Means For Merrill Lynch (BAC)
• Analysis: Krawcheck ouster fuels Merrill brokers' bank angst

Merrill Loses Another Promissory Note Case

As most readers are aware, brokerage firms structure their signing bonuses for producing brokers as long term loans which are forgiven over time. When the broker leaves the firm, regardless of the reason, the firm sues to collect the balance on the loans.

Those claims are often met with significant counterclaims by the broker - after all, the broker left the firm for a reason, usually a significant breach by the firm.

While the brokerage firms often win in those cases, since the promissory note is just that, Merrill Lynch has been losing these cases lately, as it appears that Merrill's mistreatment of its brokers over recent years is finally coming home to roost.

Last month, a FINRA Panel refused to enforce a promissory note at Merrill's request. This month, another  FINRA arbitration panel denied Merrill Lynch's request to enforce a million dollar note, and ordered Merrill Lynch to pay the broker 1.5 million dollars.

The broker keeps the one million dollars represented by the note, and Merrill pays him an additional 1.5 million dollars.

 And, to add insult to injury, the Panel assessed all forum fees against Merrill.

I have represented numerous Bank of America and Merrill Lynch brokers in employment related cases, including the defense of claims on promissory notes. While I do not know anything about this case, in my view of the world, these cases are simply an outgrowth of the poor management of Merrill Lynch which led to its financial demise, and the nearly incompetent management of the brokerage firm by Bank of America. Management of both firms took steps in their own self-interest, regardless of the impact on employees and brokers and destroyed careers in the process.

Sometimes damage to employees in management decisions is unavoidable. A reputable company compensates the employees harmed by those management decisions. Merrill Lynch and Bank of America do not compensate the employees; they sue the employees.

No wonder Bank of America/Merrill lynch finds itself in financial ruin. BofA's stock traded at over $50 a share a few years ago. Today it hovers around $10.

A copy of the award is available here.

FINRA Fines Credit Suisse $4.5M; Merrill Lynch $3M - Financial Planning

The Financial Industry Regulatory Authority has hit Credit Suisse Securities LLC with a $4.5 million fine and Merrill Lynch with a $3 million fine for not properly representing data and supervising the residential subprime mortgage securitizations they sold.
The fines, which were announced by independent regulator FINRA on Thursday, were for improper handling that took place at the firms in 2006 and 2007. Each firm’s violation prevented certain investors from adequately understanding the nuances of residential subprime mortgage securities (RMBS), according to FINRA’s investigation.
RMBS are subject to certain disclosure rules when they are sold. Firms are required to provide investors with past delinquency rates for similar financial products. They are also required to tell investors how they calculated those delinquency rates.
Both Credit Suisse and Merrill Lynch failed to adequately follow those rules, according to FINRA.

Merrill Hiring Rookies

In order to combat the mass of brokers who left ML since the BofA takover, Bank of America plans to rebuild its brokerage force in 2010 by adding rookie advisors rather than competing for talent in the industry’s expensive recruiting war according to a story in Registered Rep and Financial Times. Maybe Merrill is rethinking its "strategy" of firing brokers for trumped up reasons and forcing others to leave?
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Merrill Exec to Head UBS Wealth Management

After months of speculation, UBS today named Robert McCann as its new head of wealth management in the Americas.

Mr. McCann, the former head of the brokerage business at Merrill Lynch & Co., left Merrill in January after the acquisition by Bank of America. More>>>

No More 50% Pay Cuts?

Sallie Krawcheck, Bank of America Corp.’s head of wealth management, said she won’t do “stupid things” to pay policies that might spur financial advisers to leave the bank. I guess we don't be seening any more 50% pay cuts or insulting retention bonuses from BofA/Merrill that caused so many brokers so much harm.  More>>>

No More 50% Pay Cuts?

Sallie Krawcheck, Bank of America Corp.’s head of wealth management, said she won’t do “stupid things” to pay policies that might spur financial advisers to leave the bank. I guess we don't be seening any more 50% pay cuts or insulting retention bonuses from BofA/Merrill that caused so many brokers so much harm.  More>>>

How BofA Used Merrill To Bully the Government

Some members of Congress and others have accused federal regulators of pressuring Bank of America into going through with its merger with Merrill Lynch. But records suggest it was the bank, not regulators, doing the bullying. Law.com has an analysis of this view of the issue. More>>>