A former financial advisor (“FA”) brought a class action lawsuit against Wells Fargo alleging the firm cheated him and other FA’s out of deferred compensation. In February 2014, FA Robert Berry left Wells Fargo to launch his own firm. His agreement with Wells Fargo contained a forfeiture clause. The clause allowed the firm to reclaim deferred compensation from FA’s who joined another firm within three years of leaving Wells Fargo. This lawsuit followed soon thereafter.
Allegations of ERISA Violations
Berry alleged that the Wells Fargo forfeiture clause violated the Employee Retirement Income Security Act (ERISA). ERISA governs vesting and non-forfeiture requirements on pension benefit plans. In his complaint, Berry argued that “because the forfeiture clause is unenforceable under ERISA, plaintiff is entitled to his deferred compensation…”
Subsequently, Wells Fargo countered repeatedly ERISA does not cover their compensation plan.
Settlement in the Best Interest of Wells Fargo
The $79 million settlement marks the end of the three-year litigation. Wells Fargo maintains that the ERISA does not cover its plan. It also says it has no plans to make substantive changes to how it handles deferred compensation. After the settlement, a company spokesperson re-iterated Wells Fargo’s position in this regard. However, Wells Fargo stated that “resolving this matter is in the best interest of the company.” The settlement is pending court approval.
Financial Advisor Lawyers Weigh In
Some financial advisor lawyers and industry experts believe Wells Fargo settled partly in order to distance itself from bad press. In previous years, the company suffered from bad press related to consumer banking issues. Others believe that Wells Fargo recognized it was getting a good deal with the $79 million figure. After attorneys’ fees and distribution among as many as 1400 FA’s, each individual FA is projected to get much less than their forfeited compensation amount.
Questions about Financial Advisor Deferred Compensation
Rogge Dunn Group handles a variety of matters across the U.S. in the financial industry space. For example, we have taken on and defeated the big firms like Goldman Sachs, Citi, BBVA, Morgan Stanley and UBS.
We transition teams to new firms, handle TROs, fight off non-competes and non-solicits, ensure the following of broker recruiting protocol (for signatories), and defend against promissory note enforcement. In addition, our FINRA arbitration attorneys also help financial advisors, branch managers, RIAs and financial executives. We handle severance, regulatory issues, letters of education and FINRA investigations. For more information, contact us here.