Merrill Lynch fined $1 million for failure to arbitrate

NEW YORK – Merrill Lynch agreed to pay a $1 million fine for failing to arbitrate disputes with employees about retention bonuses related to its 2009 merger with Bank of America Corp., the Financial Industry Regulatory Authority said on Wednesday.

FINRA alleged that Merrill forced brokers to sign documents requiring them to resolve disputes about the bonuses in court, according to a settlement document released by the regulator on Wednesday. Merrill paid $2.8 billion in retention bonuses structured as loans to more than 5,000 brokers at the time of the merger, according to FINRA.

Industry rules require brokerages and brokers to resolve most employment disputes in its arbitration forum. Those disputes often include cases about signing bonuses, which companies pay to brokers when they join, or retention bonuses, which brokerages use to encourage employees to stay on board after merging with another company.

The payments, often referred to as “employee forgivable loans,” are structured as loans forgiven over time. Brokers who leave the firm, or whose employment is terminated before the loan term is over, must return part of the payment.

Merrill Lynch neither admitted nor denied FINRA’s charges, according to the settlement document. The brokerage “voluntarily decided two years ago to enforce the agreements in arbitration forums,” Merrill spokesman William Halldin said in a statement to Reuters via e-mail.

“It’s important to remember that legal action only occurs when a former employee doesn’t repay their loan as they had agreed to do,” Halldin said. Repayment problems have not been a “widespread issue” since 90 percent of financial advisers who participated in the program are still at Merrill, he said.

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