Morgan Stanley wins deferred compensation cases with FINRA

Morgan Stanley has won another arbitration battle in a series of disputes in which it argues it doesn’t owe unpaid deferred compensation to advisors who’ve left for other firms.

A three-member Financial Industry Regulatory Authority arbitration panel on Wednesday denied a request by two ex-Morgan Stanley brokers for just over $870,000 in unpaid deferred comp and 2,616 shares in the firm, valued at just over $218,000. The advisors in the case, Bryan Schon and Michael Dymkowski, left Morgan Stanley in 2012 and 2013, respectively, to join Wells Fargo.

The case presented the latest victory for Morgan Stanley in its fight to withhold unpaid deferred compensation from advisors who leave to join rival firms. At Morgan Stanley, deferred comp consists of a cash component, which takes six years to vest, or be disbursed. There’s also an equity component, which pays advisors in company stock. That takes four years to vest.

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Morgan Stanley and other firms argue deferred compensation is really a bonus used to reward advisors for sticking around for a set number of years. Lawyers representing brokers in recent cases contend the delayed payments are really akin to retirement benefits and are protected under the Employee Retirement Income Security Act of 1974, or ERISA.

Firms have also noted in recent arbitration cases that many advisors who leave for other firms receive money to make up for left-behind deferred comp as part of their recruiting deals. Evidence that they’ve received those sorts of payments leave them open to accusations of “double dipping” when they later seek to reclaim deferred compensation from their old firm.

As often happens in FINRA arbitration, the panel in the latest Morgan Stanley case did not provide reasons for its decision. Schon and Dymkowski’s formal complaint contended Morgan Stanley’s deferred compensation policies violated ERISA. Besides more than $1 million in unpaid deferred comp and stock, they had sought just over $188,000 in damages, interest and money for legal and attorney’s fees.

Their claims were denied in their entirety. Both the claimants and Morgan Stanley were ordered to pay just over $9,500 to cover hearing costs.

Schon and Dymkowski’s lawyers, John Pinney and Augustus Flottman of Bricker Graydon in Cincinnati, did not respond to a request for comment. A spokesperson for Morgan Stanley said, “We are gratified that after a comprehensive review of all the evidence, arbitration panels are repeatedly reaching the same correct conclusion based on the facts and the law: Morgan Stanley grants deferred compensation to financial advisors during their employment to promote retention and good guardianship. This compensation is not a pension plan.”

The win for Morgan Stanley comes after another win for the firm earlier this month against an ex-advisor named Patrick O’Neill, who left in 2018 to join Raymond James. Before that, Morgan Stanley prevailed over a former advisor named Jeffrey Zapoleon, who sought $1.2 million in deferred comp he said he was still owed after he left to join Wells Fargo in 2019. In January, Morgan Stanley prevailed against two former brokers who were seeking an unspecified amount of deferred compensation. And in June 2024, Morgan Stanley beat back eight ex-advisors’ attempt to claim roughly $850,000.

But not everything has gone Morgan Stanley’s way. In April 2024, it was ordered by an arbitration panel to pay more than $3 million claimed by seven advisors who had left to go to various firms. Two months later it was told to pay $1.1 million to a pair of ex-advisors who had joined Ameriprise.