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Investment Banks Under Fire For Reneging Employee Compensation
Published March 5, 2011
In two separate incidents, FINRA recently punished two firms for reneging compensation from their employees. Arbitration found that both Barclays and Merrill Lynch had unfairly decided not to pay employees in the midst of recent mergers and collapses.
Barclays was forced to pay one investment banker $715,000, plus a 4 percent interest change and trial fees, after Lehman Brothers collapsed. The banker had a compensation agreement when he worked for Lehman Brothers, which Barclays attempted to renege upon their acquisition of the firm.
In a similar case, two Merrill Lynch brokers were awarded a total of more than $1.1 million after they left the firm when it was acquired by Bank of America. FINRA found that Merrill Lynch had reneged its deferred compensation policy prior to the acquisition, and ordered the firm to pay the employees the compensation to which they were entitled. Since the employees left for “good reason”, Merrill Lynch policy states that they are entitled to their vested benefits, which includes deferred compensation.
Financial experts believe these cases are good news for investment bankers that were fired in the midst of the 2008 collapse. Some in the financial field allege that investment banks fired many bankers for no reason other than to avoid paying them bonuses. If this is the case, many expect payouts over reneged compensation to increase in the future.
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