Former Morgan Stanley Broker Sues Firm Over Deferred Compensation Denial

Sonn Law is investigating claims of brokers who were denied deferred compensation by Morgan Stanley. 

A former Morgan Stanley broker based in Boca Raton, Florida, Matthew Shafer, filed a putative class action alleging that the firm illegally withheld deferred compensation from brokers who left Morgan Stanley to join other firms. Shafer reportedly worked for Morgan Stanley for nine years before moving on to a competitor in 2018, at which point Morgan Stanley cancelled his deferred compensation in violation of the Employee Retirement Income Security Act of 1974 (ERISA). Shafer claims that “thousands” of other brokers had their deferred compensation withheld by Morgan Stanley.

Morgan Stanley automatically defers between 1.5% and 15% of its more than 15,000 brokers’ annual payout, according to an excerpt of its 2018 compensation plan included in Shaffer’s complaint. The firm allocates 75% of brokers’ deferred compensation to cash, which vests in six years and 25% company stock vesting in four years. Brokers who leave due to a disability or layoff, or to join the government or to retire are allowed to retain their deferred compensation.

Previously, a Wells Fargo broker sued Wells Fargo for cancelling the broker’s deferred compensation after he joined a competitor firm within three years of his departure from Wells Fargo. The broker claimed that the forfeiture clause violated ERISA, while Wells Fargo claimed that ERISA did not cover the compensation plan. Thousands of other former Wells Fargo financial advisors joined the lawsuit who had also been forced to forfeit their deferred compensation. Wells Fargo eventually settled with the class of brokers for $79 million.

“Brokers with larger claims are better off filing individual suits against Morgan Stanley,” said Jeffrey Sonn of Sonn Law. Following the settlement in the Wells Fargo case, class members received only about 28% of their respective deferred compensation.

The Sonn Law Group is currently investigating allegations that Morgan Stanley failed to pay financial advisors their earned deferred compensation. For a free consultation, please call us now at 833-912-3000 or complete our contact form.