At Lax & Neville LLP, our legal team has enjoyed considerable success representing and protecting the interests of financial professionals. Armed with strong negotiating skills and a deep understanding of industry rules, we help our clients that work in the securities industry successfully transition between firms. As brokers are aware, during the recruitment process, major brokerage firms offer recruiting incentives with upfront payments and corresponding promissory notes based on the registered representative’s “trailing 12” production and/or assets under management in order to entice them to leave their current firm and join the new firm. While these recruiting payments may seem like a bonus at the time they are received, these payments really are golden handcuffs because they are either only forgivable over many years or come with matching bonus agreements also payable over many years. In fact, promissory notes are usually tied to back-end bonuses that pay off a portion of the note on an anniversary date as long as the broker remains with the financial firm and reaches his or her commission and/or assets under management goals.
In many instances, when an individual or team leaves a firm, they may owe money on a promissory note they signed as part of their recruitment package with their former employer. The former firm usually sends a demand letter requesting the outstanding balance of the promissory note. If that initial demand letter is not answered, the firm will usually file a complaint that initiates a FINRA arbitration, alleging that the broker breached his or her contract to repay the note. Failing to respond to a complaint in FINRA arbitration may result in a default judgment against the broker.
Not only does our firm have substantial experience advising individuals on the compensation packages they receive with their new firms, our attorneys also effectively negotiate and settle issues arising out of outstanding promissory notes. From the ability to negotiate an outstanding promissory note balance, to negotiating Form U4 and U5 language, to even situations regarding increased severance, our lawyers are committed to providing comprehensive and cost-effective representation to professionals in the financial industry. However, there may be times when the parties cannot reach a negotiated settlement. In the event an agreement cannot be reached, our attorneys have decades of experience representing registered representatives in promissory note defense cases in the FINRA arbitration forum.
If you are a financial professional who has left a brokerage firm and has an outstanding promissory note, or are contemplating leaving your firm with an outstanding promissory note balance, you should contact our experienced team of attorneys.