Morgan Stanley Deferred Compensation “Cancellation Rule” Class Action

At issue in this class action is deferred compensation for financial advisors, in association with Morgan Stanley, Morgan Stanley Smith Barney, LLC, and the Morgan Stanley Compensation Management Development and Succession Committee. The complaint alleges that financial advisors may lose substantial amounts of their deferred compensation when they leave the company, and that this is not lawful because the deferred compensation plan (it alleges) is governed by the Employee Retirement Income Security Act of 1974 (ERISA).

The class for this action is all former Morgan Stanley FAs who had to give up deferred compensation in the MSCIP or EICP between December 30, 2014 and the date of judgment in this case because of the Cancellation Rule.

Financial advisors (FAs) who work for Morgan Stanley received deferred compensation depending on how their clients invest. FAs earn commissions, which are turned into Credits, and divided into Cash Credits or Deferred Credits—the deferred compensation.

About 75% of the deferred credits go into the Morgan Stanley Compensation Incentive Plan (MSCIP) and the other 25% go into the Equity Incentive Compensation Plan (EICP). The MSCIP credits are held as a cash amount. The EICP credits are turned into restricted stock units (RSUs) that eventually converted in to shares of Morgan Stanley stock.

The year’s credits are “awarded” to FAs in January of the following year. The awards have a Scheduled Vesting Date. For example, deferred compensation credits for the year 2015 are awarded in January 2016 and have a Scheduled Vesting Date of January 22, 2024. The complaint says, “An FA must be employed by Morgan Stanley on the Scheduled Vesting Date to receive an award.” If the FA leaves the company earlier (with some exceptions), Morgan Stanley invokes a Cancellation Rule that cancels the FA’s MSCIP accounts.

The plaintiff in this case, Matthew T. Shafer, worked at Morgan Stanley as an FA for nine years, between 2009 and 2018. By the time he left Morgan Stanley, he had over $500,000 in deferred compensation. However, he never received it, because Morgan Stanley invoked the Cancellation Rule when he left the company.

The complaint alleges that the deferred compensation plan is an “employee benefit pension plan” that is governed by ERISA because it “results in a deferral of income by employees for period extending to the termination of covered employment or beyond. The complaint alleges that the Cancellation Rule violates ERISA, and that Morgan Stanley has also breached the fiduciary duty imposed by ERISA and owed to participants in the program.

Article Type: Lawsuit
Topic: Employment

Most Recent Case Event

Morgan Stanley Deferred Compensation “Cancellation Rule” Complaint

December 30, 2020

At issue in this class action is deferred compensation for financial advisors, in association with Morgan Stanley, Morgan Stanley Smith Barney, LLC, and the Morgan Stanley Compensation Management Development and Succession Committee. The complaint alleges that financial advisors may lose substantial amounts of their deferred compensation when they leave the company, and that this is not lawful because the deferred compensation plan (it alleges) is governed by the Employee Retirement Income Security Act of 1974 (ERISA).

Morgan Stanley Deferred Compensation “Cancellation Rule” Complaint

Case Event History

Morgan Stanley Deferred Compensation “Cancellation Rule” Complaint

December 30, 2020

At issue in this class action is deferred compensation for financial advisors, in association with Morgan Stanley, Morgan Stanley Smith Barney, LLC, and the Morgan Stanley Compensation Management Development and Succession Committee. The complaint alleges that financial advisors may lose substantial amounts of their deferred compensation when they leave the company, and that this is not lawful because the deferred compensation plan (it alleges) is governed by the Employee Retirement Income Security Act of 1974 (ERISA).

Morgan Stanley Deferred Compensation “Cancellation Rule” Complaint
Tags: Deferred Compensation, ERISA Violations, Employment Arrangements