Compensation Dispute Attorneys – Bakhtiari & Harrison
Compensation disputes in the securities industry
In the securities industry, a significant portion of annual income is delivered through bonuses, incentive compensation, deferred compensation, and production-based pay. Year-end bonuses at major brokerage firms and investment banks frequently constitute the majority of an employee’s total annual earnings — and are distributed in the first quarter of the following year based on the prior year’s performance.
Compensation disputes typically arise in one of three contexts: when an employee leaves or is terminated before year-end bonuses are distributed; when a firm withholds compensation on disputed grounds after a departure; or when a financial professional transitions to a new firm and the old firm pursues repayment of upfront transition loans. In all three contexts, the firm holds the money and has significant leverage — experienced legal counsel is essential to level the playing field.
David Harrison spent years as in-house counsel at Morgan Stanley Dean Witter, where he dealt directly with compensation agreements, promissory note structures, and the full range of compensation disputes that arise at a major broker-dealer. He understands how these firms structure their arrangements to maximize their own leverage — and how to challenge those arrangements effectively on behalf of financial professionals.
Types of compensation disputes the firm handles
Withheld bonuses and incentive compensation
Brokerage firms and investment banks sometimes withhold year-end bonuses from departing employees on grounds that may be legally unjustified — claiming the employee did not meet criteria established after the fact, that the bonus is subject to an offset, or that the employee forfeited compensation by leaving. Bakhtiari & Harrison pursues recovery of withheld bonuses through FINRA arbitration and court litigation, asserting claims for breach of contract, unjust enrichment, and violation of applicable state wage and hour laws.
California financial professionals have additional protections under the California Labor Code, which broadly prohibits employers from unlawfully withholding wages — including bonus compensation that has been earned. Bakhtiari & Harrison layers California Labor Code claims alongside breach of contract and FINRA arbitration claims where appropriate.
Deferred compensation
Many financial professionals have significant deferred compensation balances — restricted stock units, deferred cash awards, performance share units, and other long-term incentive arrangements — that may be forfeited or clawed back upon departure. Bakhtiari & Harrison evaluates the legal enforceability of forfeiture provisions, the interaction between deferred compensation and non-compete restrictions, and the clawback terms in employment agreements before advising on the financial consequences of a transition.
Production credits and book of business disputes
Disputes over production credit splits and the ownership of client accounts are common when adviser partnerships disaggregate, when an adviser team separates, or when a financial professional transitions to a new firm and the old firm claims ownership of client relationships. Bakhtiari & Harrison handles these disputes through FINRA arbitration and court litigation, asserting the financial professional’s rights to their book of business and their earned production credits.
Promissory note defense
Promissory notes — upfront loans used as recruiting tools — are one of the most common sources of legal conflict in the securities industry. When a financial professional leaves a firm before the note is fully forgiven, the firm pursues repayment of the outstanding balance, typically through FINRA arbitration. Bakhtiari & Harrison defends against promissory note claims by challenging the underlying employment terms, asserting counterclaims for withheld compensation and wrongful termination, and negotiating resolutions that reflect the full financial picture of the departure. Visit the Promissory Notes page for more detail.
Counterclaims as a defense strategy
A critical component of effective compensation dispute defense — particularly in promissory note cases — is the development of strong counterclaims. Firms that pursue promissory note repayment frequently have their own exposure: withheld compensation, wrongful termination, breach of employment contract, false inducement, and violation of the Protocol for Broker Recruiting. A well-developed counterclaim posture fundamentally changes the economics of a dispute and frequently results in a resolution that is far more favorable than pure defense.
David Harrison’s experience as Morgan Stanley in-house counsel gives him direct knowledge of how major brokerage firms evaluate their counterclaim exposure — and how to use that exposure strategically in negotiations and at hearing.
FINRA arbitration for compensation disputes
Most securities industry compensation disputes are resolved through FINRA arbitration because most industry employment agreements contain FINRA arbitration clauses. Both investor-facing disputes and intra-industry compensation disputes between financial professionals and their firms are handled through FINRA arbitration. Bakhtiari & Harrison represents financial professionals in FINRA arbitration at all of FINRA’s regional hearing locations nationwide.
Employment disputes — separate page
This page covers compensation recovery. For employment relationship disputes — wrongful termination, discrimination, harassment, retaliation, constructive termination, and false inducement — visit the Employment Disputes page.
Frequently asked questions — compensation disputes
My firm withheld my bonus when I resigned — what are my options?
If your firm withheld a bonus you had earned prior to your departure, you may have claims for breach of contract, unjust enrichment, and in California, violation of the Labor Code. The key legal questions are whether the bonus was earned — meaning the performance conditions were satisfied — and whether any forfeiture provision in your employment agreement is legally enforceable under applicable law. Bakhtiari & Harrison evaluates all withheld compensation claims at no charge.
I have an outstanding promissory note — what happens when I change firms?
The outstanding balance of a promissory note is one of the primary financial risks associated with a firm transition. Before making any decision to move, you should have experienced counsel review the note terms, analyze the firm’s likely response, evaluate counterclaim opportunities, assess your overall compensation picture at the new firm, and model the net financial impact of the transition. Bakhtiari & Harrison provides transition counseling as a specific service for financial professionals considering a move.
Can I bring counterclaims against my firm in a promissory note arbitration?
Yes, and doing so is frequently the most important part of an effective defense. Common counterclaims in promissory note proceedings include withheld compensation, wrongful termination, breach of employment contract, and false inducement. A strong counterclaim posture significantly changes the settlement dynamics of a promissory note case and often results in a far better outcome than pure defense.
What is the California Labor Code’s role in bonus disputes?
California’s Labor Code provides broad protections against unlawful withholding of wages — and California courts have found that bonus compensation that has been earned constitutes wages under the Labor Code. This means California financial professionals may have Labor Code claims in addition to breach of contract claims when bonuses are withheld. Labor Code violations can result in the recovery of waiting time penalties and attorney’s fees in addition to the withheld compensation itself. Bakhtiari & Harrison asserts Labor Code claims alongside FINRA arbitration claims for California financial professionals.
Contact a compensation dispute attorney — free consultation
Contact Bakhtiari & Harrison for a free, confidential consultation about your compensation dispute. Our FINRA attorneys represent financial professionals nationwide. Cases are handled on a flat fee or hourly basis. Initial consultations are free.
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