Florida Promissory Notes & Forgivable Loans Lawyer
Brokerage firms typically offer upfront money to financial advisors and stockbrokers at the beginning of a new employment relationship. This upfront payment is made as an inducement to the broker and advisor to bring their clients and accounts to the new firm. Upon payment of the upfront money, the brokerage firm will usually require the broker or financial advisor to sign a promissory note requiring repayment of the “loan” over the course of several years. It is very common for firms to make these promissory notes forgivable loans provided the broker or financial advisor stays with the new firm for a set number of years. The loan is usually paid to the broker in a lump sum when the broker joins the new firm.
If a financial advisor leaves a brokerage firm before the promissory note is completely forgiven or repaid, the broker will owe the balance of the promissory note to the former firm. It is not uncommon for brokerage firms to withhold payment of a broker’s last commission check and even freeze a broker’s personal brokerage account at the firm and use those assets to reduce the outstanding loan balance.
Shortly after a broker or financial advisor leaves a firm, the firm will usually send out a demand letter to the broker’s home address demanding repayment of the loan within a certain period of time. If a broker fails to repay the balance in a timely manner, broker-dealers will typically initiate promissory note collection efforts by filing a Statement of Claim through FINRA arbitration.
FINRA has its own procedures and arbitration rules in place to handle these promissory note collection actions. After being served with the Statement of Claim, a broker or financial advisor has the right to file an Answer to the claim and should at this time assert his/her defenses against the promissory note. In addition to articulating why the firm is not owed money under the promissory note, a broker can raise affirmative defenses to the claim, such as the promissory note is unconscionable, the brokerage firm acted in bad faith or has “unclean hands,” the claim is barred by “accord and satisfaction,” or waiver, laches, or other legal reasons. It is at this time that a financial advisor can also assert counterclaims against the broker-dealer for claims related to his/her employment, such as wrongful termination, fraudulent inducement, misrepresentation and discrimination to name a few.
Contact Our Experienced Florida Promissory Notes & Forgivable Loans Lawyer
It is important to consult and hire an experienced securities employment attorney after being notified that a brokerage firm is seeking to recover money under a promissory note. A securities employment lawyer can contact the firm and attempt to negotiate a settlement or repayment plan to pay back the balance of the promissory note. Likewise, if a FINRA arbitration is filed to collect the balance due on the promissory note, the securities employment attorney can take all steps necessary to protect the broker and to seek a reduction of the amount due under the promissory note and to present any counterclaims the broker may have against the firm as a result of its improper conduct.