UBS, Credit Suisse, Morgan Stanley Seek Millions From Broker in Recruitment Clawbacks
A former UBS broker was ordered to pay back the wirehouse $1.75 million of his recruiting bonus after leaving the firm in less than two years.
It is the third such million-dollar judgment against him this year, and two of his former wirehouse employers are already fighting over who gets to collect from him first.
However, the ex-broker says he was justified in each of his moves, and says his situation demonstrates how advisors can be lured from firm to firm on promises of compensation only to have it backfire on them. His situation resulted in large claims from ex-employers, and an arbitration system that he says favors the firms that fund its operation.
The musical chairs of brokers moving around from firm to firm continues and the wirehouses are still writing the big checks, says Wilhelm Nash. I feel I'm a victim of what I call wirehouse stupidity.
A FINRA arbitration panel on October 8 ruled that Nash must pay $1,709,862 in promissory notes to UBS, plus an additional $23,174 loan interest, and nearly $19,000 in the firms attorney fees.
Wirehouses offer such loans as recruitment bonuses to advisors, and are only considered paid back after the advisor stays for a number of years with a firm, and meets production quotas.
UBS filed against Nash in May, claiming breach of contract and unjust enrichment. Nash did not appear at the hearing.
We are pleased about the award, said UBS spokeswoman Karina Byrne, adding that Nash resigned from UBS in January.
Nash had been with UBS for less than two years, according to FINRA broker records.
Prior to joining UBS, Nash had been with Credit Suisse for two years. After departing for UBS, Credit Suisse successfully filed a breach of contract claim against him last November in U.S. District Court in New York, and was awarded just over $1 million in February.
But Nash had been with Morgan Stanley for two years before leaving the firm in 2010 to join Credit Suisse. And in June, Nash was ordered by a FINRA arbitration panel to pay Morgan Stanley more than $2 million back in recruiting bonuses.
Nash explains he was recruited by Morgan as part of a team of brokers from Bear Stearns to form an advisory group called 1211 Group in New York, and collectively brought an AUM in excess of $2 billion with production of over $10 million.
He notes that financial firms were receiving billions of dollars of taxpayer money in the form of TARP funding to bail them out at the time, but the practice of large cash signing bonuses to top producers continued. Just our five team members alone received over $20 million in up-front cash bonuses.
A Morgan Stanley spokeswoman said the firm declined to comment on Nash. When asked about Nash, a member of the 1211 Group told On Wall Street he had no comment.
Nash says he was then welcomed into Credit Suisse with arms wide open and with their check book waving. With an interest in real estate, he accepted a senior private banker position, he says, but the firm then closed its real estate lending group a year after he was hired in 2011.
A mediation in the summer of 2013 failed.
A representative for Credit Suisse said the firm had no comment on the case or Nashs recruitment.
Now he says he is taking the opportunity to start fresh, since his residence in Brick Township, NJ, was battered in Hurricane Sandy.
"After all the stress and emotional ups and downs I decided to retire from the business after 20 years to focus on my family."
Now in Florida, Nash is defending himself against collection claims from his ex-employers. The firms are fighting each other too: Credit Suisse is currently arguing it should be able to collect its claim first before Morgan, though Morgan was first to file proceedings against Nash in Florida.
In June, Credit Suisse filed a motion to intervene in Morgan Stanleys financial claim against Nash in a Civil Circuit court in Palm Beach county. Credit Suisse may be irreparably damaged if Morgan Stanley receives proceeds of Nashs assets before Credit Suisse does, its motion noted. The proceedings against Nash in the Florida court are ongoing.
An attorney that represented Nash in these hearings, Florida-based Marc Dobin, says his former client has witnessed the worst of industry practices. This is a situation where the securities business just treated someone really badly and essentially left him without options, Dobin says.
FINRA suspended Nash from practice in 2014 after he did not pay the Morgan Stanley award. Nash notes that in his entire career he never had a customer complaint.
I'm very proud of the many successes in my career in the financial services industry, he says. I built wonderful personal relationships with formal clients that exist today and have a powerful Rolodex. Coming from a former financial advisor that never had one costumer complaint, I can honestly say I'm happier now more than ever. Someday I believe we will see the recruitment shell game end and the IRS and financial regulators will step in to stop the madness.